IMPORTANT NOTICE IMPORTANT: You Must Read the Following Before Continuing. the Following Applies to the Prospectus Following

IMPORTANT NOTICE

IMPORTANT: You must read the following before continuing. The following applies to the prospectus following this page (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 as a result of such access.

This Prospectus is valid for 12 months from its date. SIBUR Securities DAC (the "Issuer") will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Prospectus which is capable of affecting the assessment of the Notes and arises or is noted between the date of this Prospectus and the time at which the Notes are admitted to trading on the Regulated Market (as defined below), prepare a supplement to this Prospectus. The obligation to prepare a supplement to this Prospectus shall not apply following the time at which the Notes are admitted to trading on the Regulated Market.

THE PROSPECTUS MAY NOT BE FORWARDED OR DISTRIBUTED OTHER THAN AS PROVIDED BELOW AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. THE PROSPECTUS MAY ONLY BE DISTRIBUTED OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR WITHIN THE UNITED STATES TO QIBs (AS DEFINED BELOW). ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE PROSPECTUS IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

NOTHING IN THE PROSPECTUS CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES DESCRIBED IN THE PROSPECTUS (THE "SECURITIES") 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 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 BELIEVE IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A (A "QIB") OR (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), 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, investors must be (i) QIBs or (ii) outside the United States in reliance on Regulation S. By accessing these materials, you shall be deemed to have represented to us that you (i) are a QIB or (ii) are outside the United States.

Under no circumstances shall the 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. Recipients of the Prospectus who intend to subscribe for or purchase the Securities are reminded that any subscription or purchase may only be made on the basis of the information contained in the Prospectus.

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, sell, exchange or otherwise transfer the 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.

You are reminded that the Prospectus has been delivered to you on the basis that you are a person into whose possession the 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 the Prospectus to any other person.

The materials relating to the offering do 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 in such jurisdiction.

The Prospectus has been 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 "SIBUR Holding" (the "Company"), the Issuer, Bank GPB International S.A., Goldman Sachs International, J.P. Morgan Securities plc and Sberbank CIB (UK) Limited (the "Joint Lead Managers and Bookrunners"), Banca IMI S.p.A, acting through its London Branch (the "Joint Lead Manager" and, together with the Joint Lead Managers and Bookrunners, the "Joint Lead Managers") nor any person who controls them nor any director, officer, employee nor agent of it or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Prospectus distributed to you in electronic format and the hard copy version available to you on request from the Company, the Issuer and the Joint Lead Managers.

PROHIBITION OF SALES TO EEA RETAIL INVESTORS

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 Directive 2014/65/EU (as amended, "MiFID II"); or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the "IDD"), 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 (as amended, 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.

MIFID II PRODUCT GOVERNANCE / PROFESSIONAL INVESTORS AND ECPs ONLY TARGET MARKET

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.

SIBUR SECURITIES DAC (a designated activity company incorporated under the laws of Ireland) U.S.$500,000,000 3.45% Guaranteed Notes due 2024 unconditionally and irrevocably guaranteed by PJSC "SIBUR Holding" Issue Price: 100% SIBUR Securities DAC, a company incorporated under the laws of Ireland (the "Issuer") and a wholly-owned subsidiary of PJSC "SIBUR HOLDING" (the "Guarantor", the "Company" or "SIBUR"), is offering (the "Offering") an aggregate principal amount of U.S.$500,000,000 3.45% Guaranteed Notes due 2024 (the "Notes"). The Guarantor will unconditionally and irrevocably guarantee the due and prompt payment of all amounts at any time becoming due and payable in respect of each of the Notes under the deed of guarantee (the "Guarantee"). The Notes will be constituted under a trust deed to be entered into between Citibank, N.A., London Branch (the "Trustee") and the Issuer on or about 23 September 2019 (the "Trust Deed"). The Notes will be subject to, and have the benefit of, the Trust Deed. The Issuer will pay interest on the Notes at an annual rate equal to 3.45% of their outstanding principal amount. Interest on the Notes is payable semi-annually in arrear on 23 March and 23 September of each year, commencing on 23 March 2020. Payments on the Notes (including payments by the Guarantor under the Guarantee or otherwise under the Trust Deed) will be made without withholding or deduction for or on account of taxes, unless such withholding or deduction is required by law. In the event of any withholding or deduction for or on account of taxes of Ireland or the Russian Federation, the Issuer or (as the case may be) the Guarantor will, subject to certain exceptions and limitations, pay additional amounts to the holder of any Note to the extent described in the terms and conditions of the Notes under "Terms and Conditions of the Notes" (the "Terms and Conditions"). The Issuer may redeem the Notes in whole but not in part at 100% of the principal amount thereof, plus accrued and unpaid interest, prior to maturity as described under "Terms and Conditions of the Notes — Redemption and Purchase". The Issuer may redeem the Notes, in whole but not in part, at any time prior to maturity, but on one occasion only, on giving not less than 30 and not more than 60 days' irrevocable notice, at a price equal to the principal amount thereof, plus the Make Whole Premium (as defined in the Terms and Conditions) plus any accrued and unpaid interest and additional amounts (if any) to (but excluding) the date of redemption. See "Terms and Conditions of the Notes — Redemption and Purchase — Redemption at Make Whole". The Issuer may also redeem the Notes, in whole or in part, at their principal amount together with any accrued and unpaid interest, if the Issuer or the Guarantor has or will become obliged to pay certain additional amounts and otherwise as described under "Terms and Conditions of the Notes — Redemption and Purchase — Redemption for tax reasons". The Notes are also subject to redemption, in whole or in part, at their principal amount, together with any accrued and unpaid interest and additional amounts (if any), at the option of the Issuer at any time on or after the date three months prior to the Maturity Date. See "Terms and Conditions of the Notes — Redemption and Purchase — Optional Redemption at Par". The Notes will be senior unsecured obligations of the Issuer and will rank equally in right of payment with the Issuer's other existing and future senior unsecured and unsubordinated indebtedness. The Guarantee will be a senior unsecured obligation of the Guarantor and will rank equally in right of payment with all existing and future senior unsecured and unsubordinated obligations of the Guarantor. The 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 the Issuer or of the quality of the Notes that are 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") 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"). Such approval relates only to the Notes which are to be admitted to trading on a regulated market for the purposes of MiFID II and/or which are to be offered to the public in any Member State of the European Economic Area. AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE THE SECTION OF THIS PROSPECTUS ENTITLED "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS. The Notes and the Guarantee (the "Securities") have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or under any securities laws of any other jurisdiction. Subject to certain exemptions from, or transactions not subject to, the Securities Act, the Securities may not be offered or sold within the United States. The Securities will be offered and sold outside the United States in reliance on Regulation S under the Securities Act ("Regulation S") and in the United States only to "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act ("QIBs"), in reliance on an exemption from registration pursuant to Rule 144A under the Securities Act ("Rule 144A"). Prospective purchasers of the Securities are hereby notified that the seller of the Securities may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Neither the United States Securities and Exchange Commission ("SEC") nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offence. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws pursuant to registration thereunder or exemption therefrom. For a description of these and certain further restrictions on the transfer of the Notes, see "Transfer Restrictions, Clearing and Settlement". The Notes will be offered and sold in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes that are being offered and sold in accordance with Regulation S (the "Regulation S Notes") will initially be represented by beneficial interests in a Regulation S global note (the "Regulation S Global Note") in registered form, without interest coupons attached, which will be deposited with a common depositary for Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking, S.A. ("Clearstream, Luxembourg") and will be registered in the name of a nominee for such common depository on or about 23 September 2019 (the "Issue Date"). The Notes that are being - i-

offered and sold in reliance on Rule 144A (the "Rule 144A Notes") will initially be represented by beneficial interests in a global note (the "Rule 144A Global Note" and, together with the Regulation S Global Notes, the "Global Notes") in registered form, without interest coupons attached, which will be deposited on or about the Issue Date with a custodian for, and registered in the name of Cede & Co. as nominee for, The Depository Trust Company ("DTC"). Beneficial interests in the Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC, Euroclear and Clearstream, Luxembourg, and their account holders. Definitive notes in respect of beneficial interests in the Regulation S Global Note and Rule 144A Global Note ("Regulation S Definitive Notes" and "Rule 144A Definitive Notes", respectively, and together, the "Definitive Notes") will not be issued except as described under "Summary of Provisions of the Notes while in Global Form — Exchange of Interests in Global Notes for Definitive Notes". The Notes are expected to be rated BBB- by Fitch Ratings Limited ("Fitch") and Baa3 by Moody's Investors Service Limited ("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. Each of Fitch and Moody's (which each provide ratings in relation to the Company and its subsidiaries (the "Group") and the Notes) are established in the European Union and registered in accordance with Regulation (EU) No. 1060/2009 (the "CRA Regulation").

Joint Lead Managers and Bookrunners BANK GPB GOLDMAN SACHS INTERNATIONAL S.A. J.P. MORGAN SBERBANK CIB INTERNATIONAL (GAZPROMBANK) Joint Lead Manager BANCA IMI The date of this Prospectus is 19 September 2019.

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IMPORTANT INFORMATION ABOUT THE OFFERING

This prospectus (the "Prospectus") comprises a prospectus for the purposes of Regulation (EU) 2017/1129 (the "Prospectus Regulation") and has been prepared for the purpose of giving information with regard to the Issuer, the Company and its consolidated subsidiaries taken as a whole (the "Group"), the Guarantee and the Notes which, according to the particular nature and circumstances of the Issuer, the Company, and the type of the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, ﬁnancial position, proﬁt and losses and prospects of the Issuer, the Company and the Group, the rights attaching to the Notes and the Guarantee and of the reasons for the issuance and its impact on the Issuer, the Company and the Group.

THE NOTES ARE OF A SPECIALIST NATURE AND SHOULD ONLY BE BOUGHT AND TRADED BY INVESTORS WHO ARE PARTICULARLY KNOWLEDGEABLE IN INVESTMENT MATTERS. AN INVESTMENT IN THE NOTES IS SPECULATIVE, INVOLVES A HIGH DEGREE OF RISK AND MAY RESULT IN THE LOSS OF ALL OR PART OF THE INVESTMENT.

The Issuer and the Company each 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 contains no omission likely to affect its import.

Each Noteholder participating in the Offering will be deemed to have made certain acknowledgments, representations and agreements as set forth under "Transfer Restrictions, Clearing and Settlement". The Securities have not been registered under the Securities Act or any state securities laws or the laws of any other jurisdiction, are subject to restrictions on transferability and resales, and unless so registered, may not be transferred or resold except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.

None of the Joint Lead Managers (as defined herein) or the Trustee makes any representation or warranty, express or implied, as to the accuracy or completeness of any of the information in this Prospectus or any other information supplied in connection with the Securities. Each person receiving this Prospectus acknowledges that such person has not relied on any of the Joint Lead Managers or the Trustee in connection with its investigation of the accuracy of such information or its investment decision. Each person contemplating accepting the Offering and making an investment in the Notes must make its own investigation and analysis of the creditworthiness of the Issuer and the Company and its own determination of the suitability of such investment, with particular reference to its own investment objectives and experience, and any other factors that may be relevant to it in connection with such investment. No person has been authorised in connection with the Offering to make or provide any representation or information regarding the Issuer, the Company, the Notes or the Guarantee other than as contained in this Prospectus. Any such representation or information should not be relied upon as having been authorised by the Issuer, the Company, the Joint Lead Managers or the Trustee.

Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note in the Offering 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. Unless otherwise indicated, all information in this Prospectus is given as of the date hereof. Neither the Issuer, nor the Company nor any other person assumes any obligation (and expressly declares that it has no such obligation)

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to update or change any information contained in this Prospectus once there is no longer a requirement under the Prospectus Regulation for this Prospectus to be updated.

This Prospectus does not constitute an offer of, or the solicitation of an offer to buy or an invitation to subscribe for or purchase, by or on behalf of the Issuer, the Company, the Joint Lead Managers or other person, the Notes in any jurisdiction where it is unlawful to make such an offer or solicitation. The distribution of this Prospectus and the offering, sale and delivery of the Notes in the Offering in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Joint Lead Managers, the Issuer, the Company and the Trustee to inform themselves about and to observe any such restrictions. This Prospectus may not be used for, or in connection with, any offer to, or solicitation by, anyone in any jurisdiction or under any circumstances in which such offer or solicitation is not authorised or is unlawful. For a description of certain further restrictions on offers, sales, deliveries and transfers of the Notes and distribution of this information, see "Subscription and Sale" and "Transfer Restrictions, Clearing and Settlement".

None of the Issuer, the Company, the Joint Lead Managers, the Trustee or any of their respective affiliates or agents makes any representation about the legality of the acceptance of the Offering or the purchase of, or exchange for, the Notes by an investor under applicable investment or similar laws. Each prospective investor is advised to consult its own counsel and business adviser as to legal, business and related matters concerning the acceptance of the Offering and the Notes. The contents of this Prospectus are not to be construed as legal, business or tax advice. Prospective purchasers should be aware that they might be required to bear the financial risks of an investment in the Notes for an indefinite period of time.

Each prospective purchaser of the Notes must comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, offers or sells the Notes and must obtain any consent, approval or permission required of it for the purchase, offer or sale by it of the Notes under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers or sales, and none of the Issuer, the Company, the Joint Lead Managers, the Trustee or any of their respective affiliates or agents shall have any responsibility therefor.

The Issuer may withdraw the Offering at any time and the Issuer and the Joint Lead Managers reserve the right to reject any offer to purchase the Notes in whole or in part and to sell to any prospective investor less than the full amount of Notes sought by such investor. In connection with the Offering, the Joint Lead Managers and any of their affiliates, acting as investors for their own accounts, may purchase Notes and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Notes and other securities of the Issuer or the Company or related investments in connection with the Offering or otherwise. Accordingly, references in this Prospectus to the Notes being issued, offered, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or acquisition, placing or dealing by, the Joint Lead Managers and any of their affiliates acting as investors for their own accounts. The Joint Lead Managers do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

The Notes have not been recommended by or approved by the SEC or any other federal or state securities commission or regulatory authority, nor has any commission or regulatory authority passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offence.

This Prospectus has been approved by the Central Bank as competent authority in Ireland under the Prospectus Regulation. The Central Bank only approves this Prospectus as meeting the - iv-

standards of completeness, comprehensibility and consistency imposed by the Prospectus Regulation. Such approval should not be considered as an endorsement of any of the Issuer, the Company or the Group or the quality of the Notes that are the subject of this Prospectus and investors should make their own assessment as to the suitability of investing in the Notes.

Any investment in the Notes does not have the status of a bank deposit and is not within the scope of the deposit protection scheme operated by the Central Bank. The Issuer is not and will not be regulated by the Central Bank as a result of issuing the Notes.

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STABILISATION

IN CONNECTION WITH THE ISSUE OF THE NOTES, J.P. MORGAN SECURITIES PLC (THE "STABILISING MANAGER") (OR PERSONS ACTING ON ITS BEHALF) 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, STABILISATION MAY NOT NECESSARILY OCCUR. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFERING OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF ALLOTMENT OF THE NOTES. ANY STABILISATION ACTION OR OVER- ALLOTMENT MUST BE CONDUCTED BY THE RELEVANT STABILISING MANAGER (OR PERSONS ACTING ON ITS BEHALF) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.

AVAILABLE INFORMATION

The Issuer and the Guarantor have agreed that, so long as any Notes are "restricted securities" within the meaning of Rule 144(a)(3) of the Securities Act, the Issuer and the Guarantor will, during any period in which it is neither subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor exempt from reporting thereunder pursuant to Rule 12g3-2(b) under the Exchange Act, provide to any holder or beneficial owner of any such "restricted security", or to any prospective purchaser of such restricted security designated by such holder or beneficial owner, the information specified in, and meeting the requirements of, Rule 144A(d)(4) of the Securities Act upon the request of such holder, beneficial owner or prospective purchaser.

NOTICE TO INVESTORS IN THE U.S.

THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER REGULATORY AUTHORITY IN THE UNITED STATES NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE SECURITIES OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.

THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT, AND SUBJECT TO CERTAIN EXCEPTIONS, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES. THE SECURITIES ARE BEING OFFERED AND SOLD OUTSIDE THE UNITED STATES IN RELIANCE ON REGULATION S AND BY THE JOINT LEAD MANAGERS THROUGH THEIR RESPECTIVE REGISTERED BROKER-DEALER AFFILIATES INSIDE THE UNITED STATES SOLELY TO QIBS WITHIN THE MEANING OF RULE 144A, IN RELIANCE ON THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144A (SEE "SUBSCRIPTION AND SALE"). PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT SELLERS OF ANY RULE 144A NOTE MAY BE RELYING UPON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.

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NOTICE TO INVESTORS IN THE UK

This Prospectus is only directed at persons who (i) are outside the United Kingdom, (ii) are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Financial Promotion Order") or (iii) are persons falling within Articles 49(2)(a) to (e) of the Financial Promotion Order (all such persons together being referred to as "relevant persons"). This Prospectus must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this communication.

MIFID II PRODUCT GOVERNANCE / PROFESSIONAL INVESTORS AND ECPs ONLY TARGET MARKET

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.

PROHIBITION OF SALES TO EEA RETAIL INVESTORS

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 (as amended, the "IDD"), 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 (as amended, 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 RUSSIAN INVESTORS

This Prospectus is not an offer, or an invitation to make offers, to sell, exchange or otherwise transfer 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 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 Federal Law No. 39-FZ "On the Securities Market" dated 22 April 1996, as amended (the "Russian QIs"), and must not be distributed or circulated into Russia or made available in Russia to any persons who are not Russian QIs, unless and to the extent they are otherwise permitted to access such information under Russian law. The Notes have not been and will not be registered in Russia and are not intended for "placement" or "circulation" in Russia (each as defined in Russian securities laws) unless and to the extent otherwise permitted under Russian law. - vii-

NOTICE TO PROSPECTIVE INVESTORS IN SINGAPORE

This Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Prospectus or any other document or material in connection with the offer and sale, or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be distributed, nor may the Notes be offered or sold or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the "SFA")) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, 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.

Solely for the purposes of its obligations pursuant to sections 309B(1)(a) and 309B(1)(c) of the SFA, the Issuer has determined, and hereby notifies all relevant persons (as defined in Section 309A of the SFA) that the Notes are "prescribed capital markets products" (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018.

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LIMITATION ON ENFORCEABILITY OF CIVIL LIABILITIES

The Issuer is incorporated under the laws of Ireland and the Company is incorporated under the laws of the Russian Federation. The Issuer's and the Company's directors and executive officers named in this Prospectus reside outside the United Kingdom and the United States. All or a substantial portion of the Company's assets and the assets of the Company's officers and directors are also located principally in Russia. As a result, it may not be possible for the Trustee, acting on behalf of Noteholders or, in certain circumstances, a Noteholder, to:

• effect service of process within the United Kingdom or the United States on the Issuer or the Company or on the Issuer's or the Company's officers and directors named in this Prospectus; or

• obtain or enforce English or U.S. court judgments against the Issuer, the Company, the Issuer's or Company's officers and directors on any basis, including actions under the civil liability provisions of English law or U.S. securities laws.

Under the terms of the Trust Deed and the Guarantee, the Issuer and the Company will appoint an agent for service of process in London, England, for claims under the Trust Deed and the Guarantee. It is possible that a Russian court will not recognise this appointment. The Issuer and the Company will not appoint an agent for service of process in the United States. It may be difficult for the Trustee, acting on behalf of Noteholders, to enforce, in original actions brought in courts in jurisdictions located outside the United Kingdom or United States, liabilities predicated upon English law or U.S. securities laws. In addition, judgments rendered by a court in any jurisdiction outside the Russian Federation will be recognised by courts in Russia only if an international treaty providing for the recognition and enforcement of judgments in civil cases exists between the Russian Federation and the country where the judgment is rendered and/or a federal law of the Russian Federation providing for the mutual recognition and enforcement of foreign court judgments is in effect. No such treaty exists between the United States and the Russian Federation, or between the United Kingdom and the Russian Federation, for the reciprocal recognition and enforcement of foreign court judgments in civil and commercial matters. However, according to recent trends in Russian court practice, a foreign judgment can be recognised and enforced in the Russian Federation based on the principles of reciprocity and international comity, provided, however, that there is a bilateral or multilateral treaty to which the Russian Federation and the relevant foreign country are parties. However, in the absence of established court practices, it is difficult to predict whether a Russian court will be inclined in any particular case to recognise and enforce an English court judgment on these grounds. These limitations may deprive the Trustee of effective legal recourse for claims related to your investment in the Notes.

The Notes, the Guarantee and the Trust Deed are governed by the laws of England and the Issuer has agreed in the Trust Deed and the Company has agreed in the Guarantee that disputes arising thereunder and under the Notes are subject to arbitration in accordance with the Rules of Arbitration of the LCIA. Ireland and the Russian Federation are parties to the United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the "New York Convention"). Consequently, an arbitral award from an arbitral tribunal in the United Kingdom or the United States would generally be recognised and enforced in the Russian Federation on the basis of the rules of the New York Convention and enforcement in Ireland of an arbitral award rendered in the United Kingdom or the United States will be subject to the provisions of the New York Convention. However, it may be difficult to enforce arbitral awards in the Russian Federation due to, among other factor, the limited experience of Russian courts in international commercial transactions; official and unofficial political resistance to the - ix-

enforcement of awards against Russian companies in favour of foreign investors; and the inability of Russian courts to enforce such orders.

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FORWARD-LOOKING STATEMENTS

This Prospectus contains "forward-looking statements". Forward-looking statements are not historical facts and can often be identified by the use of terms like "estimates", "projects", "anticipates", "expects", "intends", "believes", "will", "may", "should", "plans", "target", "aim" or the negative of these terms, and similar statements of a future or forward-looking nature. All forward-looking statements, including, without limitation, discussions of strategy, plans, objectives, goals and future events or performance, involve risks and uncertainties.

While these statements are based on sources believed to be reliable and on the Group's management's current knowledge and best belief, they are merely estimates or predictions and cannot be relied upon. The Group cannot assure you that the indicated, expressed or implied future results will be achieved. The following factors and features are exposed to risks and uncertainties which may cause the Group's actual results to differ materially from the results indicated, expressed or implied in the forward-looking statements used in this Prospectus:

• demand in the Russian and global gas processing and petrochemicals markets;

• the Group's ability to successfully implement any of its business strategies and ability to fund its growth;

• the Group's expectations about demand for its products;

• competition in the marketplace;

• the Group's ability to service its existing indebtedness;

• oil and natural gas prices;

• changes in political, social, legal or economic conditions in Russia and the other markets which affect the Group's operations (including inflation and fluctuations in currency exchange rates and interest rates);

• the Group's ability to respond to legal and regulatory developments and restrictions in relation to the industries in which the Group operates;

• adverse changes in the Group's liquidity, capital resources or capital expenditures;

• the Group's success in identifying other risks to its business and managing the risks of the aforementioned factors; and

• those described in the part of this Prospectus entitled "Risk Factors", which should be read in conjunction with the other cautionary statements that are included in this Prospectus.

These factors and the other risk factors described in this Prospectus (in the section entitled "Risk Factors") are not necessarily all of the important factors that could cause the Group's actual results to differ materially from those expressed in any of the Group's forward-looking statements. Other unknown or unpredictable factors also could harm the future results of the Group. Under no circumstances should the inclusion of such forward-looking statements in this Prospectus be regarded as a representation or warranty by the Group, the Joint Lead Managers, or any other person with respect to the achievement of results set out in such statements or that the underlying assumptions used will in fact be the case. The forward-looking statements included in this - xi-

Prospectus are made only as of the date of this Prospectus and the Group cannot assure you that projected results or events will be achieved. Except to the extent required by law, the Group disclaims any obligation to update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Presentation of Financial Information

The financial information set out in this Prospectus with respect to the Group has, except where expressly stated otherwise, and subject to rounding, been derived from the Group's consolidated financial statements included in this Prospectus.

The interim consolidated financial information of the Group set out in this Prospectus as of and for the six months ended 30 June 2019 and 2018 has been derived or calculated based on, except where noted otherwise, from the unaudited consolidated interim condensed financial information of the Group as of and for the six months ended 30 June 2019 set out on pages F-2 – F-28 (the "Interim Financial Statements"), prepared in accordance with the International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board.

The consolidated financial information of the Group set out in this Prospectus, as at and for the years ended 31 December 2018 and 2017, has been derived or calculated based on, except where noted otherwise from the audited consolidated financial statements of the Group as at and for the year ended 31 December 2018 set out on pages F-29 – F-98 (the "Annual 2018 Financial Statements"). The consolidated financial information of the Group set out in this Prospectus for the year ended 31 December 2016 has been derived from or calculated based on, except where noted otherwise, the audited consolidated financial statements of the Group as at and for the year ended 31 December 2017 set out on pages F-99 – F-171 (the "Annual 2017 Financial Statements", and together with the Annual 2018 Financial Statements, the "Annual Financial Statements"). The independent auditor's reports with respect to the Annual 2018 Financial Statements and the Annual 2017 Financial Statements are set out on pages F-31 – F-37 and F-101 – F-107, respectively.

Effective 1 January 2019, the Group adopted IFRS 16 applying modified retrospective approach and did not restate comparatives. IRFS 16 makes no distinction between operating and finance leases with respect to lessees. Instead, a lessee is required at the commencement of the lease to recognise (i) a "right of use" asset, and (ii) a lease liability. The adoption of IFRS 16 resulted in exclusion of operating lease expenses from the operating expenses, recognition of additional depreciation charge of right-of-use assets and finance expenses resulted from recognition of lease liability. Cash payments for lease liabilities are now presented within financial activities in the cash flow statement instead of operating cash flows as it was before adoption of a new standard. For more details, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

In 2018, the Group has changed its accounting policy in respect of presentation of proceeds from grants received for the purchase of property plant and equipment in consolidated cash flow statement. Proceeds from grants received are presented within investing activity instead of financing activity. Proceeds from grants for the year ended 31 December 2016 were reclassified in the Prospectus to conform the presentation of the Interim Financial Statements and the Annual 2018 Financial Statements.

Effective 1 January 2019, the Group also changed its accounting policy in respect of expenses related to property plant and equipment maintenance carried out on an at least annual basis. Such expenses are capitalised as part of property plant and equipment and are depreciated until next scheduled maintenance. Since the effect of the change in accounting policy is not material no retrospective adjustment was made. - xiii-

Independent Auditors

The Group's Annual Financial Statements have been audited by AO PricewaterhouseCoopers Audit ("PwC") of Butyrsky Val 10, Moscow, 125047, the Russian Federation, independent auditors, as stated in their reports appearing elsewhere in this Prospectus. PwC is a member of the "Russian Union of Auditors (Association)", a self-regulated organisation of auditors.

With respect to the Interim Financial Statements, the independent auditors have reported that they applied limited procedures in accordance with professional standards for a review of such information. However, their separate report included elsewhere in this Prospectus, 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.

Financial Statements of the Issuer

The audited financial statements of the Issuer as of and for the years ended 31 December 2017, 2016 and 2015 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and, together with the audit reports thereon, as issued by PricewaterhouseCoopers, 1 Spencer Dock, North Wall Quay, Dublin 1, Ireland, the auditors of the Issuer, who are chartered accountants and are members of the Institute of Chartered Accountants in Ireland and registered auditors qualified to practice in Ireland, have been filed with Euronext Dublin and shall be deemed to be incorporated in, and to form part of, this Prospectus (for the links to the Issuer's financial statements, see "General Information").

Non-IFRS measures

This Prospectus includes certain financial measures that are not measures of performance or liquidity specifically defined by IFRS. These include EBITDA, Adjusted EBITDA, EBITDA Margin, Net Debt, Net Debt/Adjusted EBITDA, Net Debt/EBITDA and EBITDA/Interest.

Throughout this Prospectus (unless stated otherwise), the following definitions are used:

• "EBITDA" means, for any period, profit or loss for the period, adjusted by income tax expense, finance income and expenses, depreciation and amortisation, share of net income of joint ventures and associates, impairment and reversal of impairment of property, plant and equipment and write off of advances for capital construction, impairment of assets held for sale, result of subsidiary's disposal and remeasurement of related assets and result of subsidiary's acquisition and remeasurement of related liabilities; • "Adjusted EBITDA" means, for any period, EBITDA (as defined above) adjusted for the respective portion of EBITDA of joint ventures and associates and net of non-controlling interest share of related subsidiaries' EBITDA. In 2018, the Group's management changed its methodology for calculation of Adjusted EBITDA by adding adjustment for non- controlling interest share of related subsidiaries' EBITDA. The Adjusted EBITDA for the years ended 31 December 2017 and 2016 and for the six months ended 30 June 2018 in this Prospectus has been recalculated to conform to the current methodology.

• "EBITDA Margin" means, for any period, EBITDA divided by the Group's external revenue, while segment's EBITDA Margin is calculated as segment's EBITDA divided by total segment's revenue;

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• "Net Debt" means total debt (the sum of long-term debt, short-term debt and current portion of long-term debt, long-term lease liabilities, short-term lease liabilities) less total cash and cash equivalents as of the end of the relevant period; • "Net Debt/Adjusted EBITDA" means, as of 31 December 2018, 2017 and 2016, Net Debt divided by Adjusted EBITDA for the years then ended. As of 30 June 2019 and 2018, Net Debt to Adjusted EBITDA means Net Debt divided by Adjusted EBITDA for the 12 months ended 30 June 2019 and 2018, respectively, which is calculated as the sum of Adjusted EBITDA for each of the two most recent consecutive semi-annual periods;

• "Net Debt/EBITDA" means, as of 31 December 2018, 2017 and 2016, Net Debt divided by EBITDA for the years then ended. As of 30 June 2019 and 2018, Net Debt to EBITDA means Net Debt divided by EBITDA for the 12 months ended 30 June 2019 and 2018, respectively, which is calculated as the sum of EBITDA for each of the two most recent consecutive semi-annual periods;

• "Net Debt/Interest" means, for any period, Net Debt divided by interest (comprising interest expense and capitalised interest); and

• "EBITDA/Interest" means, for any period, EBITDA divided by interest expense and capitalised interest reported in the period.

The Company has included these measures because it believes that they are frequently used by investors in understanding the Group's financial performance. Further, the Company uses the non- IFRS measures supplementary to, among other things, evaluate the performance of operations, develop budgets and measure performance against those budgets. In addition, certain of the Group's financing facilities contain financial covenants that are based on some of these measures.

The non-IFRS measures disclosed in this Prospectus are unaudited supplementary measures of the Group's performance and liquidity that are not required by, or presented in accordance with, IFRS. These measures are not defined by IFRS and the Company's use and definition of these metrics may vary from other companies in its industry due to differences in accounting policies or differences in the calculation methodology. In particular, EBITDA as disclosed in this Prospectus is calculated in a manner some companies refer to as "adjusted EBITDA", in that the Group's EBITDA excludes items in addition to interest, income taxes, depreciation and amortisation. These non-IFRS measures have limitations and should not be considered in isolation, or as substitutes for financial information as reported under IFRS. Accordingly, undue reliance should not be placed on the non-IFRS measures presented in this Prospectus. For a reconciliation of Adjusted EBITDA and EBITDA to profit for the reporting period, see "Selected Financial and Other Information — Non-IFRS Financial Measures".

Currency

Throughout this Prospectus, unless stated otherwise, the following definitions are used:

• "EUR" or "euro" means the lawful currency for the time being 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;

• "RUB", "rouble" or "Russian rouble" means the lawful currency for the time being of the Russian Federation; and

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• "USD" or "U.S. dollar" means the lawful currency for the time being of the United States.

References

In this Prospectus, all references to "United States" and "U.S." are to the United States of America, all references to "UK" are to the United Kingdom and all references to "European Union" and "EU" are to the European Union and its member states as of the date of this Prospectus. All references to "CIS" are to the countries that formerly comprised the Union of Soviet Socialist Republics and that are now members of the Commonwealth of Independent States: Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

Rounding

Some numerical figures included in this Prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that preceded them. Unless otherwise specified, all percentages have been rounded to the nearest one-tenth of 1%.

Market, economic and industry data

This Prospectus contains market, economic and industry data, statistics and information, including historical market data and forecasts which have been obtained from industry publications, market research and other publicly available information. Certain information regarding market size, market share, market position, growth rates and other industry data pertaining to the Group and its business contained in this Prospectus consists of Directors' estimates and conclusions based on their review of internal Group data, external third-party data and reports compiled by professional organisations and other sources, including IHS Markit's ("IHS" or "IHS Markit"), and International Institute of Synthetic Rubber Producers ("IISRP"). In addition, the Company has derived certain information and statistics in this Prospectus, including certain information and statistics concerning the Russian economy in general and related subjects from the CBR and the Federal Service for State Statistics of the Russian Federation ("Rosstat"). Such information is contained in this Prospectus under the headings "Presentation of Financial and Other Information", "Risk Factors", "Business" and "Operating and Financial Review". Where third- party information, data or statistics are set out, they have been accurately reproduced, and, as far as the Company is aware and is able to ascertain from relevant available information published by the aforementioned sources, no facts have been omitted which would render the reproduced information, data and statistics inaccurate or misleading. Where third-party information has been used in this Prospectus, the source of such information has been identified. Neither the Company nor any of the Joint Lead Managers accepts liability for the accuracy of any such information, and prospective investors are advised to use such information with caution.

Investors should keep in mind that neither the Company nor any of the Joint Lead Managers has independently verified information obtained from third-party sources, including from industry and Russian governmental bodies. 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. The Company does not intend, and does not assume any obligation, to update market, economic and industry data and information set forth in this Prospectus. Because market behaviour, preferences and trends are subject to change, prospective investors should be aware that market, economic and industry data and information in this Prospectus and estimates based

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on any data therein may not be reliable indicators of future market performance or the Group's future results of operations.

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TABLE OF CONTENTS

OVERVIEW OF THE GROUP ...... 1 OVERVIEW OF THE OFFERING ...... 6 RISK FACTORS ...... 12 USE OF PROCEEDS ...... 63 CAPITALISATION ...... 64 SELECTED FINANCIAL AND OTHER INFORMATION ...... 65 OPERATING AND FINANCIAL REVIEW ...... 70 INDUSTRY ...... 134 BUSINESS ...... 152 REGULATION OF GAS PROCESSING AND PETROCHEMICALS BUSINESS IN RUSSIA ...... 221 MANAGEMENT ...... 231 SHAREHOLDERS ...... 240 RELATED PARTY TRANSACTIONS ...... 241 DESCRIPTION OF THE ISSUER ...... 245 TERMS AND CONDITIONS OF THE NOTES ...... 247 SUMMARY OF PROVISIONS OF THE NOTES WHILE IN GLOBAL FORM ...... 273 TRANSFER RESTRICTIONS, CLEARING AND SETTLEMENT ...... 277 TAX CONSIDERATIONS ...... 285 SUBSCRIPTION AND SALE ...... 302 GENERAL INFORMATION ...... 306 GLOSSARY OF TECHNICAL TERMS ...... 309 INDEX TO FINANCIAL INFORMATION ...... F-1

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OVERVIEW OF THE GROUP

This section of the Prospectus contains basic information about the Group and its industry. You should read the entire Prospectus carefully, including the "Risk Factors", the Interim Financial Statements and the Annual Financial Statements included elsewhere in this Prospectus.

Overview

SIBUR is a leader in the Russian petrochemicals industry with a uniquely-positioned, balanced business model. As of 30 June 2019, approximately 26,500 Group employees were contributing to the success of customers in the chemical, fast-moving consumer goods ("FMCG"), automotive, construction, energy and other industries in 80 countries worldwide.

The Group has three operating and reportable segments: (i) Olefins and Polyolefins, (ii) Plastics, Elastomers and Intermediates and (iii) Midstream. For detailed description of these segments, see "Operating and Financial Review — Reportable Segments".

In its Olefins and Polyolefins segment, the Group operates one propane dehydrogenation facility, two steam crackers facilities, two polypropylene ("PP") and polyethylene ("PE") production facilities and five biaxially oriented PP films ("BOPP-films") production sites. For more information, see "Business — Overview of Business Segments — Olefins and Polyolefins Segment — Production Sites".

In its Plastics, Elastomers and Intermediates segment, the Group operates one steam cracker, four plastic and organic synthesis production plants (manufacturing polyethylene terephthalate ("PET"), glycols, expandable polystyrene ("EPS"), alcohols and acrylates) and three elastomer production plants (for various grades of commodity and speciality rubbers and TPE). For more information, see "Business — Overview of Business Segments — Plastics, Elastomers and Intermediates Segment — Production Sites".

The Group owns and operates Russia's largest and most extensive integrated midstream asset base for processing and transportation of APG and NGLs, located primarily in Western Siberia, which is the largest oil and gas producing region in Russia and where the Group sources most of its feedstock. This infrastructure includes eight out of the 10 existing GPPs in Western Siberia (including Yuzhno-Priobskiy GPP, a joint venture between the Company and Gazprom Neft) and two GFUs (excluding the GFU of JSC Uralorgsintez ("Uralorgsintez"), which was divested in April 2017 but the Group has a long-term processing arrangement regarding the use of Uralorgsintez fractionaton capacity). The Group's transportation infrastructure comprises pipeline network. It also utilises railway transportation facilities of Petrochemicals Transportation Company ("PTC") (see "Business — Joint ventures and Associates — Petrochemical Transportation Company joint venture with SG-Trans"). The Group's GPPs also have direct links to the production facilities of major oil companies operating in Western Siberia through a network of APG transportation pipelines. For more information, see "Business — Overview of Business Segments — Midstream Segment — Production Sites".

In the six months ended 30 June 2019 and 2018, the Group's revenue was RUB 266,279 million and RUB 257,694 million; the Group's EBITDA was RUB 86,116 million and RUB 89,188 million; and the Group's EBITDA margin was 32.3% and 34.6%, respectively. In the years ended 31 December 2018, 2017 and 2016, the Group's revenue was RUB 568,647 million, RUB 454,619 million and RUB 411,812 million; the Group's EBITDA was RUB 201,007 million, RUB 160,851 million and RUB 139,629 million; and the Group's EBITDA margin was 35.3%, 35.4% and 33.9%, respectively. For more information on the Group's financial results, see "Operating and Financial Review". - 1-

Competitive Strengths

The Group attributes its leading position and strategic advantages principally to the following competitive strengths:

A Leading Emerging Markets Petrochemical Company

The Group is a leading emerging markets petrochemical group and the largest petrochemical producer in the Russian market, according to IHS. As of 31 December 2018, the Group was the Russia's largest producer of PP and low density polyethylene ("LDPE") (according to IHS) and BOPP-films (according to Applied Market Information) in the Olefins and Polyolefins segment, and the Russia's largest producer of PET and EPS (according to Market Report Company), MEG (according to Kortes (part of Thomson Reuters)), styrene-butadiene rubbers ("SBR") (according to Chem Courier) and styrene- butadiene- styrene thermoplastic elastomers ("SBS") (according to IISRP) and the second largest producer of PBR (according to Chem Courier) in the Plastics and Elastomers segment.

The Group is one of the 10 largest independent petrochemical-focused companies globally as measured by EBITDA and one of the five largest privately held companies in Russia. In the six months ended 30 June 2019 and the year ended 31 December 2018, the Group's revenue was RUB 266,279 million and RUB 568,647 million; the Group's EBITDA was RUB 86,116 million and RUB 201,007 million; and the Group's EBITDA margin was 32.3% and 35.3%, respectively.

For more information, see "Business — Competitive Strengths — A Leading Emerging Markets Petrochemical Company".

Operating in Growing and Diversified End Markets and Geographies

The Group expects that the lower PP and PE consumption per capita in Russia and certain of its export markets, including Asia and Turkey and some of the European countries, compared to the world's more developed economies (12.7kg per person in emerging markets as compared to 30.1kg per person in North America and Europe in 2018, according to IHS), supports the growth potential of these markets and that, as a result, demand for basic petrochemical products in Russia and some of the Group's export markets will grow faster than in many of the world's more developed countries, making these regions attractive markets for the Group to expand output, particularly as 86% of the population resides in emerging regions as per International Monetary Fund.

Furthermore, the Group believes that the current structurally undersupplied petrochemical market in China will support sustainable growth in demand in the longer term. Currently, China is facing supply and demand imbalances for PP and PE products, according to IHS. The Group believes that further expansion of the production capacity of its petrochemicals business would enable it to benefit from China's supply and demand imbalances for PP and PE, resulting in sustainable export growth for the Group in the future.

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For more information, see "Business — Competitive Strengths — Operating in Growing and Diversified End Markets and Geographies".

Low Cost Chemical Producer with High Barriers to Entry

The Group's key production facilities are located in Western Siberia – Russia's largest hydrocarbon region – accounting, according to IHS, for approximately two-thirds of Russian oil and gas production, 57% of total extraction volumes of APG and 80% of gas condensate in Russia. Western Siberia has one of the lowest energy costs globally (including for APG and NGLs (feedstock for midstream operations of the Group) and liquefied petroleum gases ("LPG") and naphtha (key feedstocks for the Group's petrochemical business)), according to IHS, due to the abundance of hydrocarbons, limited alternative demand options available to Russian oil and gas companies and remote location from key export markets. This provides petrochemical operations in the area with a critical cost advantage (which is secured, in the Group's case, via long-term feedstock contracts), resulting in superior margins compared to global peers.

For more information, see "Business — Competitive Strengths — Low Cost Chemical Producer with High Barriers to Entry".

Significant Upside from Close-to-Completion World-Scale ZapSibNeftekhim Project

In 2014, the Group announced a new major greenfield project, ZapSibNeftekhim. ZapSibNeftekhim is expected to allow the Group to triple its polyolefin production capacity to approximately three million tonnes per annum and almost double the Group's share of internally processed feedstock (mainly local LPG) in favour of significantly higher margin polyolefins. The construction of ZapSibNeftekhim started in early 2015. In the first half of 2019, construction and pre-commissioning works at key processing and technological units of ZapSibNeftekhim were completed and the ZapSibNeftekhim project has been proceeded to the commissioning stage.

The Group expects that upon commissioning of ZapSibNeftekhim, almost all of the Group's APG- sourced feedstock (the pricing of which is mostly driven by the domestic natural gas price) will be utilised to produce petrochemical products. Meanwhile, purchased raw NGL feedstock (which purchase price is linked to market prices on naphtha and LPG) is expected to be utilised for LPG and naphtha production generating stable fractionation spread. As a result, Group's operating cash flows are expected to be more stable and less exposed to the oil price volatility.

For more information, see "Business — Competitive Strengths — Significant Upside from Close- to-Completion World-Scale ZapSibNeftekhim Project".

Superior Margins and Resilient Cash Flow Generation Through the Cycle as Basis for Further Growth Investments

The Group's balanced business model allows it to benefit from both the oil and gas as well as petrochemical cycles, smoothing changes to the Group's cash flow and earnings volatility. The - 3-

Group's flexibility in terms of both its products and it sales destinations, and ZapSibNeftekhim's favourable location between the European and Asian markets, allows the Group to capture the most attractive margins through each cycle, as the Group's balanced business model allows it to maintain a large and diversified range of products offered to various end markets and that are subject to different cycles.

For more information, see "Business — Competitive Strengths — Superior Margins and Resilient Cash Flow Generation Through the Cycle as Basis for Further Growth Investments".

Strong Management and Shareholder Team with Track Record of Value Creation and Transparent Corporate Governance

The Group's management team has significant experience and expertise in the industry's different platforms, products and geographies. Committed to the Group, a majority of the Group's management has been a part of the Group for more than 10 years. The Group's management team has a proven track record of revenue growth, increasing the Group's revenue from approximately USD 4.0 billion in 2009 to approximately USD 9.1 billion in 2018 and the Group's EBITDA from USD 460 million in 2004 to USD 819 million in 2009 and to USD 3.2 billion in 2018.

The Group seeks to maintain high corporate governance standards. The Company has a two-tier governance structure, comprising a 12-member Board of Directors, with four independent directors, and a management board, which is responsible for effective day-to-day management. Through its corporate governance structure, the Group's executive bodies and the management team work to ensure the Group's accountability and compliance with its code of corporate conduct in order to create long-term value for the Group's shareholders.

For more information, see "Business — Competitive Strengths — Strong Management and Shareholder Team with Track Record of Value Creation and Transparent Corporate Governance".

Strategy

The Group is implementing a strategy that includes the following key objectives:

Expand Core Production Base and Monetise Low-Cost Feedstock

The Group is focused on identifying and implementing attractive relatively low-risk expansion opportunities for its core production base, focusing on further growth in the highest-margin Olefins and Polyolefins segment and opportunistic low-cost growth in selected Plastics, Elastomers and Intermediates niches. The Group also aims to take advantage of the ongoing Russian Government's efforts to incentivise NGL processing.

Maintain Profitable Growth Beyond Core Production Base to Tap New Oil and Gas Regions with a Potential to Leverage Midstream Infrastructure Developed by Third parties

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proximity to Gazprom's Amur Gas Processing Plant ("Gazprom's Amur GPP") at the Russia- China border.

For more information, see "Business — Strategy — Maintain Profitable Growth Beyond Core Production Base to Tap New Oil and Gas Regions with a Potential to Leverage Midstream Infrastructure Developed by Third parties".

Continuously Pursue Operational Excellence

The Group plans to continue to pursue operational excellence to enhance its cost advantages, mitigate risks and promote the long-term sustainability of its business by applying global best practices. For example, since 2010, the Group has been implementing the production system of SIBUR (see "Business — Employees — Production System of SIBUR (PSS)") ("PSS"). PSS's principal task is to implement a process of continuous improvement through the efforts of all of the Group's employees by using simple and straightforward tools.

Through PSS, the Group seeks to improve its health and safety policies and procedures, increase the utilisation rates at its facilities, reduce its energy intensity index and lower its lost time injury frequency ("LTIF").

In addition, digitalisation of the Group's operations is one of its core initiatives to increase commercial and operational efficiency.

For more information, see "Business — Strategy — Continuously Pursue Operational Excellence".

Form New and Develop Existing Client Relationship

For more information, see "Business — Strategy — Form New and Develop Existing Client Relationship".

Risk Factors

An 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.

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OVERVIEW OF THE OFFERING

The following is an overview of the terms of the Notes. This overview is extracted from, and should be read in conjunction with, the full text of the Terms and Conditions, the Guarantee and the Trust Deed constituting the Notes, which prevail to the extent of any inconsistency with the terms set out in this overview. Capitalised terms used herein and not otherwise defined have the respective meanings given to such terms in the Terms and Conditions.

Issuer SIBUR Securities DAC, incorporated under the laws of Ireland, on 8 November 2012, having its registered address at 10 Earlsfort Terrace, Dublin 2, Ireland, a wholly-owned subsidiary of the Guarantor, as set out in "Description of the Issuer".

Guarantor PJSC "SIBUR Holding", incorporated under the laws of the Russian Federation, having its registered address at 6 bldn. 30, Quarter 1 of Eastern Industrial District, Tobolsk, Tyumen Region, Russian Federation.

Issue Amount U.S.$500,000,000 aggregate principal amount of the Notes.

Joint Lead Managers, and Bank GPB International S.A., Goldman Sachs International, Bookrunners J.P. Morgan Securities plc and Sberbank CIB (UK) Limited.

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

Issue Date 23 September 2019

Maturity Date 23 September 2024

Trustee Citibank, N.A., London Branch.

Registrar Citigroup Global Markets Europe AG.

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

Interest The Notes will bear interest at a rate equal to 3.45% per annum, payable semi-annually in arrear on 23 March and 23 September of each year, commencing on 23 March 2020.

Form The Notes will be issued in registered form without interest coupons attached, in denominations in aggregate principal amount of U.S.$ 200,000 each and integral multiples of U.S.$ 1,000 in excess thereof. The Regulation S Notes will initially be represented by beneficial interests in the Regulation S Global Note in registered form, without interest coupons attached, which will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg and registered in the name of a nominee for such common depositary on or about the Issue Date. The Rule 144A Notes will initially be represented by beneficial interests in the Rule144A Global Note in registered form, without interest coupons attached, which will be deposited on or about the - 6-

Issue Date with a custodian for, and registered in the name of Cede & Co. as nominee of, the DTC. Beneficial interests in the Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC, Euroclear and Clearstream, Luxembourg, and their account holders. Definitive Notes will not be issued except as described under "Summary of Provisions of the Notes while in Global Form — Exchange of Interests in Global Notes for Definitive Notes".

Status of the Notes The Notes will constitute direct, unsubordinated and (subject to Condition 4.1 of the Terms and Conditions) unsecured obligations of the Issuer and shall at all times rank pari passu and rateably without any preference among themselves.

Guarantee The Guarantor has, pursuant to the Guarantee, unconditionally and irrevocably, guaranteed the payment when due of all sums expressed to be payable by, and all other obligations of, the Issuer under the Trust Deed and the Notes. The Guarantee constitutes direct, unsubordinated and (subject to Condition 4.1 of the Terms and Conditions) unsecured obligations of the Guarantor.

Use of Proceeds The Group will use the aggregate net proceeds from the issuance of the Notes for general corporate purposes and refinancing of existing indebtedness.

Redemption for Tax Reasons The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, at 100% of the principal amount thereof together with interest accrued to the date fixed for redemption, including any additional amounts due under Condition 6.2 of the Terms and Conditions as a result of any change in, or amendment to, the laws, treaties or regulations of any Relevant Jurisdiction (as defined in the Terms and Conditions) occurring on or after the Issue Date. See "Terms and Conditions of the Notes — Redemption and Purchase — Redemption for tax reasons".

Make whole call option The Issuer may, at its option, redeem the Notes, in whole but not in part, at any time, but on one occasion only, on giving not less than 30 and not more than 60 days irrevocable notice, at a price equal to the principal amount thereof, plus the Make Whole Premium (as defined in the Terms and Conditions) plus any accrued and unpaid interest and additional amounts, if any, up to but excluding the date of redemption. See "Terms and Conditions of the Notes — Redemption and Purchase — Redemption at Make Whole".

Optional Redemption at Par The Issuer may, at any time on or after the date three months prior to the Maturity Date, on giving not less than 30 nor more than 60 days' irrevocable notice to the Noteholders, redeem the Notes in whole or in part, at the principal amount thereof, together with interest accrued and unpaid and additional - 7-

amounts (if any) to but excluding the Par Optional Redemption Date (as defined in the Terms and Conditions). See "Terms and Conditions of the Notes — Redemption and Purchase — Optional Redemption at Par".

Redemption in the Event of If at any time after the Issue Date, by reason of the Illegality introduction of any change in any applicable law, regulation, regulatory requirement or directive of any applicable agency, it is or would become unlawful for the Issuer or the Guarantor to perform or comply with any or all of their respective material obligations under any of the Notes, the Guarantee or the Trust Deed (an "Illegality Event") and such Illegality Event continues for more than 30 Business Days (as defined in the Terms and Conditions), the Issuer shall, on giving not less than 30 nor more than 60 days' notice to the Noteholders redeem the Notes in whole but not in part, at the principal amount thereof, together with interest accrued and unpaid and additional amounts (if any) to but excluding the Illegality Event Redemption Date (as defined in the Terms and Conditions). See "Terms and Conditions of the Notes — Redemption and Purchase — Redemption in the Illegality Event".

Covenants The Terms and Conditions contain restrictions on certain activities of the Issuer, the Guarantor and any Material Subsidiaries (as defined in the Terms and Conditions), including, without limitation:

(i) negative pledge;

(ii) limitation on certain mergers and consolidations;

(iii) requirement for the provision of certain financial information.

There are significant exceptions to the requirements contained in these covenants. See "Terms and Conditions of the Notes — Covenants" for a further description of the restrictions set forth above.

Events of Default In the case of an Event of Default (as defined in the Terms and Conditions), the Trustee may, subject as provided in the Trust Deed, give notice to the Issuer and the Guarantor that the Notes are immediately due and repayable. Events of Default include, among others:

(i) failure by the Issuer or, as the case may be, the Guarantor to pay any amounts due under the Notes;

(ii) breach of other obligations by the Issuer or the Guarantor under the Notes, the Trust Deed or the Guarantee;

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(iii) cross-default (for a payment default) or cross- acceleration (for all other defaults) of the Issuer, the Guarantor or any Material Subsidiary;

(iv) non-compliance by the Issuer, the Guarantor or any Material Subsidiary with an order or judgment of a judicial or administrative authority;

(v) inability of the Issuer, the Guarantor or any Material Subsidiary to pay debts as they fall due to its creditors generally;

(vi) certain events relating to liquidation, examinership, insolvency, winding-up or dissolution (as applicable) of the Issuer, the Guarantor or any Material Subsidiary;

(vii) expropriation, attachment, sequestration, execution or distress in respect of the Group; or

(viii) nationalisation or seizure of the assets of the Issuer, the Guarantor or any Material Subsidiary,

in certain cases, subject to certain conditions and exceptions as set out in "Terms and Conditions of the Notes — Events of Default".

Rating The Notes are expected to be rated BBB- by Fitch and Baa3 by Moody's. The Guarantor has been rated Baa3 by Moody's, BBB- by Fitch and BBB- by S&P Global Ratings Europe Limited ("S&P"). Credit ratings assigned to the Notes do not necessarily mean they are a suitable investment for you. 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, paid on an expected final payment date or paid on any 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, the Issuer or the Guarantor could adversely affect the price that a subsequent purchaser will be willing to pay for the Notes. If the other rating organisation rated the securities, the Group cannot assure you that the rating that such other rating organisation would assign to the securities would not be lower than the ratings assigned by Fitch and Moody's. Ratings of the Notes by Fitch and Moody's are not necessarily indicative of the ratings that may in the future be issued in respect of the Notes by other rating agencies, if requested by the Issuer. The

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Group recommends that you analyse the significance of each rating independently from any other rating. Each of Fitch, Moody's and S&P is established in the European Union and registered in accordance with the CRA Regulation.

Withholding Tax All payments on the Notes or under the Guarantee by or on behalf of the Issuer or the Guarantor shall be made free and clear of, and without withholding or deduction for or on account of, any taxes, duties, assessments or governmental charges of whatsoever nature, unless such withholding or deduction is required by applicable laws or regulations. If any such withholding or deduction for or on account of taxes of any Relevant Jurisdiction is so required, the Issuer or (as the case may be) the Guarantor shall pay such additional amounts as will result in the receipt by the Noteholders of such amounts as would have been received by them in respect of such Notes or Guarantee if no such withholding or deduction had been made or required to be made. See "Terms and Conditions of the Notes — Taxation".

Listing Application has been made to Euronext Dublin for the Notes to be admitted to the Official List and trading on the Regulated Market. The Regulated Market is a regulated market for the purposes of MiFID II. There is no assurance that a trading market in the Notes will develop or be maintained.

Transfer Restrictions The Securities have not been and will not be registered under the Securities Act and, subject to certain exceptions, the Notes may not be offered or sold within the United States. The Notes may be sold in other jurisdictions only in compliance with applicable laws. See the sections of this Prospectus entitled "Transfer Restrictions, Clearing and Settlement" and "Subscription and Sale".

Governing Law The Notes, the Trust Deed, the Guarantee and the Agency Agreement and any non-contractual obligations arising therewith will be governed by English law.

Security Codes Regulation S Notes: ISIN: XS2010044621

Common Code: 201004462

Rule 144A Notes: ISIN:US825795AB30

Common Code: 111730539

CUSIP: 825795AB3

Legal Entity Identifier of the 635400EHVYJXNYBPWI41 Issuer

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Legal Entity Identifier of the 253400CH24ZBBZMFSM69 Guarantor

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

Yield The annual yield of the Notes when issued is 3.45%. The annual yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.

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RISK FACTORS

An investment in the Notes involves a high degree of risk. You should carefully consider the risks described below and the other information contained in this Prospectus before making a decision to invest in the Notes. Any of the following risks, individually or together, could adversely affect the Group's business, results of operations and financial condition in which case the trading price of the Notes could decline and you could lose all or part of your investment.

The Group has described the risks and uncertainties that its management believes are material, but these risks and uncertainties may not be the only ones the Group faces. Additional risks and uncertainties of which the Group is currently not aware or which currently deems immaterial may also have an adverse effect on the Group's business, financial condition, results of operations and value of the Group's properties.

Prospective investors should be aware that the value of the Notes and any income from them may go down as well as up and that investors may not be able to realise their initial investment.

RISKS RELATING TO THE GROUP'S BUSINESS

General economic conditions and related cyclicality in the petrochemicals industry impacts the Group's results of operations

The Group's petrochemicals segments (the Olefins and Polyolefins segment and the Plastics, Elastomers and Intermediates segment) are impacted by cyclicality in the petrochemicals industry. Prices of petrochemical products are subject to significant fluctuations as they are influenced by trends in global supply and demand, including differences in supply and demand between domestic and export markets.

Demand for the Group's products is driven by the strength of the economies in which its customers and end-consumer industries, including energy, automotive, construction and FMCG, operate. These customers and industries are affected by the state of the global as well as local economies. A downturn in any of these economies could have an adverse effect on the end-consumer industries reducing demand for any of the Group's products and resulting in decreased sales volumes and prices, which, in turn, could have a material adverse effect on the Group's operations. Demand for the Group's products could also be adversely affected by shifting consumer preferences and technological changes. Demand could also decline as a result of regulation that restricts or limits demand for plastic packaging in the FMCG market – including, for example, regulations in the UK and other countries aimed at limiting demand for single-use plastic bags through mandatory charges by retailers at the point of sale, restrictions on sales of plastic cups, cutlery and plates introduced in France, prohibitions on sales of certain plastic bags introduced in France and certain African countries, as well as proposals to ban plastic microbeads in consumer products. Although the Group's product portfolio benefits from significant diversification, any factors that adversely affect demand for the Group's product could result in decreased sales in volumes and/or average selling prices realised by the Group. See also "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Cyclicality of the Petrochemicals Industry".

While demand is generally linked to economic activity, supply is linked to long-term investments in capacity expansion and structural changes in feedstock supply, such as, for example, the discovery and commercialisation of new feedstock sources, such as shale gas in the United States. When significant new capacity or supply becomes available and is not matched by corresponding growth in demand, average industry operating margins typically fall. At the same time, capacity additions require substantial lead times, and when growth in demand is not matched by respective - 12-

capacity expansions, average industry operating margins typically rise. As a result, the petrochemicals industry experiences periods of tight supply of petrochemical products, leading to high capacity utilisation rates and margins, followed by periods of oversupply, leading to reduced capacity utilisation rates and margins, and, accordingly, the profit margins of petrochemical producers historically have been cyclical. See also "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Cyclicality of the Petrochemicals Industry". The Group expects that the prices for petrochemical products will continue to reflect this cyclicality, and thus its results of operations will also be affected by these cycles.

A decrease in oil and oil derivatives prices may affect the Group's results of operations

Prices for a large portion of the Group's feedstock and processed goods are directly or indirectly linked to oil or oil derivatives prices. Oil and oil derivatives prices have historically been volatile and dependent on a variety of factors such as changes in market supply and demand balances, geopolitical developments affecting producing countries, actions by the Organisation of the Petroleum Exporting Countries ("OPEC"), or agreements by other oil producing nations to maintain production levels and pricing, technological advances, the impact of international environmental regulations designed to reduce carbon emissions and prices and the availability of alternative fuels, force majeure events and other factors.

Furthermore, global macroeconomic and political factors, such as reduction of oil production by OPEC countries, may lead to a decrease in supply of feedstock by the Group's long-term counterparties, as well as generally on the international market. In addition, if the Group is unable to continue to secure multi-year agreements with its existing suppliers or any new suppliers of feedstock, it may impair feedstock supply, its pricing and volumes as well as planning of the Group's future operating expenses and investments. The occurrence of any of these factors may have a material adverse effect on the Group's business, financial condition or results of operations.

The Group produces energy products, including LPG and naphtha, and sells a large portion of produced volumes of these products to external customers at prices that are largely dependent on oil and oil derivatives. Therefore, any decrease in prices for oil and oil derivatives may negatively affect the Group's revenues from such sales. In addition, prices for many of the Group's petrochemical products tend to track price movements for oil and oil derivatives, particularly naphtha, the primary feedstock for most petrochemicals. Thus, a decrease in oil prices has a similar impact on the Group's revenue from sales of petrochemical products, which can be, however, partially offset by a decrease in feedstock costs. See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Crude Oil, Raw NGL, LPG and Naphtha Prices". Accordingly, a significant decrease in oil prices would decrease the Group's revenue from sales and, as a result, impact the Group's investment plans for new facilities, which could have a material adverse effect on the Group's business, financial condition and results of operations.

Competition from third parties may adversely affect the Group's results of operations

The Group faces competition across each of its operating segments with third-party oil and gas companies and petrochemical companies. In the Midstream segments, the Group's principal competitors are Russian and international oil and gas companies involved in refining and processing, APG and NGL. The Group's competitors in the Olefins and Polyolefins segment and the Plastic, Elastomers and Intermediates segment include primarily other petrochemical companies based in Russia and other countries as well as oil and gas companies that have their own petrochemicals production. See "Business — Competition". Most of the Group's products are commodity grade and competition for such products is principally based on price, which may be determined on the basis of a number of factors, including geographic proximity to the source of - 13-

feedstock, costs of connection to upstream and downstream infrastructure, available capacity and access to markets. The Group's competitors may reduce their prices below that of the Group to obtain a portion of the Group's market share. Competition for the Group's more specialised petrochemical products is based on certain additional factors, such as quality of products, performance, manufacturing flexibility, delivery times and customer service. The priority of taking these factors into account is based on the needs of particular customers and the characteristics of specific products.

Some of the Group's competitors may have or may develop (through alliances with other market players or otherwise) certain advantages over the Group, including greater financial, technical and logistical resources, greater economies of scale, broader name recognition and more established relationships in certain markets and, as a result, may succeed in offering more attractive prices, greater product quality, improved delivery times or better customer service. Such developments could render the Group's facilities and products less competitive. Structural capacity, available production, decisions and announcements the Group's competitors make about plans to increase capacity and the entry of new players into the gas processing and petrochemicals businesses may also weaken the Group's competitive position. Competition can have a significant impact on the prices the Group realises for its products and on demand for its products, either of which may materially adversely affect the Group's business, financial condition or results of operations. The effect of such new competition on the cost of the feedstock the Group uses in its operations as well as prices for the Group's products could have a material adverse effect on the Group's business, financial condition and results of operations.

In recent years, the global natural gas market has witnessed a number of new trends that have had the effect of lowering international gas prices. In particular, shale gas, a form of natural gas embedded in shale, is becoming an increasingly important source of natural gas for the United States and, to a lesser extent, certain European markets. The increase of shale gas production has contributed to a general decline in the price of natural gas in the United States and globally. A further decrease in natural gas prices globally may result in lower prices for gas-based feedstock used for petrochemicals production. As a result, the global petrochemicals industry may experience periods of oversupply that could intensify competition among petrochemical producers. Any significant increase in competition in the petrochemicals industry, coupled with any adverse changes to the Group's position in the global cost curves, could adversely affect the Group's business, financial condition or results of operations.

The Group may incur losses as a result of fluctuations in the foreign currency exchange rates

The functional currency of the Company and most of its subsidiaries and the Group's presentation currency is the Rouble. However, as the Group's sales outside Russia and a significant part of its borrowings are denominated in foreign currencies, movements of the Rouble foreign exchange rate can have a significant effect on the Group's financial performance. See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Macroeconomic and Other Economic Trends".

The Group's sales to countries outside Russia are primarily denominated in U.S. dollars and, to a much lesser extent, in euro. In many cases the Group's domestic sales are linked to international benchmark prices quoted in U.S. dollars and euros, however in case of substantial shifts in the Rouble exchange rate the adjustment of domestic selling prices can take a certain amount of time. At the same time, the Group's expenses are primarily denominated in Russian roubles. As a result, appreciation of the Rouble relative to the U.S. dollar or the euro has a negative effect on the Group's operational results as sales denominated in foreign currency decrease in rouble terms.

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In addition, a significant part of the Group's borrowings is denominated in foreign currencies, primarily in U.S. dollars and, to a much lesser extent, in euro. As a result of depreciation of the Rouble relative to these foreign currencies, the Group's liabilities denominated in these foreign currencies increase in rouble terms, as do interest costs on the Group's foreign currency- denominated borrowings. Correspondingly, the Group's financial expenses tend to increase as a result of foreign exchange losses recorded by the Group. Further, some of the Group's borrowings contain restrictive financial leverage covenants, which could be breached as a result of a significant Rouble depreciation and, in turn, may lead to the Group's failure to comply with some or all of these covenants and constitute an event of default. This could result in unfavourable changes to credit terms, immediate or accelerated repayment of debt, lead to cross-default under the Group's borrowings or limit or reduce its ability to implement and execute its key strategies, which could, in turn, have a material adverse effect on the Group's business, financial condition and results of operations.

The Group is dependent upon long-term relationships with a limited number of third-party feedstock suppliers

The Group purchases APG and NGLs from a limited number of oil and gas companies (namely, key suppliers of APG are Rosneft, Gazprom Neft and RussNeft, and NGLs are purchased mainly from NOVATEK and Gazprom) primarily under multi-year supply contracts and joint venture arrangements. The Group may be unable to retain some or all of these suppliers and/or said suppliers may not maintain their current level of business with the Group. A reduction or cessation of supplies of feedstock from the Group's suppliers for any reason and the Group's inability to obtain, in substitution, feedstock supplies of a comparable size in a timely and cost-effective manner from alternative sources could result in production delays, increased costs and reductions in delivery of the Group's finished products to customers, any of which could have a material adverse effect on the Group's business, financial condition or results of operations.

The availability of feedstock sourced from the Group's suppliers may also be negatively affected by a number of factors largely beyond the Group's control, including interruptions in production by suppliers, supplier allocation to other purchasers, transportation infrastructure disruptions, transportation costs, price fluctuations, higher labour costs and the effect of inflation on other operating costs. A lack of timely and cost-effective feedstock supply due to any of the foregoing factors would have a material adverse effect on the Group's business, financial condition or results of operations.

The Group's selling prices for natural gas are significantly impacted by changes in regulated natural gas prices and may be affected by increases in natural gas supply in the future

The Group's revenue from the sales of natural gas accounted for 9.3%, 8.6%, 10.4% and 11.2% of the Group's total revenue for the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016, respectively. The prices at which the Group sells its natural gas are significantly impacted by changes in regulated gas prices at which Gazprom, the major Russian gas producer, sells natural gas on the domestic market. This price regulation is effected by the Russian Government, through the FAS, and in the past has been subject to various political and administrative factors. This price regulation does not apply to independent gas producers; however, the regulated price significantly influences the domestic market conditions. Domestic natural gas prices rose from 2014 to 2015, primarily as a result of the Russian Government's plan for the gradual liberalisation of the domestic natural gas market and remained unchanged to the end of 2016. In July 2017, gas prices were increased by 3.9%. Effective 3 July 2018, gas prices increased by 3.4%. Starting from 1 July 2019, the wholesale natural gas prices were further increased by 1.4%. See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Natural Gas Prices". There can be no assurance that natural gas - 15-

prices in Russia will continue to increase, either as foreseen by the current liberalisation plan or in response to an increase in energy prices elsewhere in the world. Accordingly, the Group has and may continue to have, limited pricing flexibility with respect to its sales of natural gas. In addition, the Group's prices for natural gas could also be adversely affected by any future liberalisation of prices in the Russian natural gas industry, as there can be no assurance that free market prices would be higher than those set by state authorities. In particular, while the Group's APG purchase price is lower than the regulated natural gas price due to economic reasons described in "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Natural Gas Prices", because the price at which the Group sells natural gas it produces from APG is largely driven by regulated natural gas prices, any tightening in the spread between the Group's average APG purchasing price and its average natural gas selling price will negatively impact its financial results (see "— An increase in feedstock prices may result in increased operating expenses").

In addition, if there is a significant increase in natural gas supplies in Russia and elsewhere, the Group may need to decrease its natural gas selling price significantly below the regulated natural gas price to compete effectively on the natural gas market. Over the past decade, the global supply of natural gas has increased resulting in lower international gas prices. In particular, the increase of shale gas production globally has contributed to a general decrease in the price of natural gas in the United States and, if this trend continues, may drive down natural gas prices globally, including in Russia. A significant decrease in natural gas prices in Russia could result in a decrease in the prices the Group charges for natural gas and this could adversely affect the Group's profitability.

These limitations and developments could have a material adverse effect on the Group's business, financial condition and results of operations.

Disruption in railway transportation or increases in costs related to railway transportation could adversely impact the Group's results of operations

The Group incurs substantial transportation costs due to the geographic spread of its operations. During the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016, the Group's transportation costs accounted for 19.9%, 18.6%, 20.3% and 23.9%1 of the Group's operating expenses, respectively, with a large portion of transportation expenses represented by rail transportation. The Group mainly uses rail for transportation of its refined products, intermediates and feedstock, including 100% of the Group's sales of LPG, naphtha and MTBE, significant volumes of NGLs as feedstock (between the Group's GPPs and GFUs) and a majority of the Group's petrochemical products. As a result, the Group's operations depend upon the Russian railway system and rely predominantly on the rail freight network operated by JSC Russian Railways ("Russian Railways"). Russian Railways is a state-owned group which owns the main rail network in Russia and handles a substantial majority of all railway freight transportation in Russia.

A significant part of the physical infrastructure and other assets owned and operated by Russian Railways, particularly its rail network, largely date back to Soviet times and, as a result, the Russian railway system is subject to risks of disruption. Any disruption in railway transportation (including as a result of technical breakdowns, accidents, improper maintenance, shortages of locomotives, industrial action caused by trade unions at Russian Railways or a blockage or destruction of key rail routes connecting the Group's production facilities to the Russian Railways network) could significantly affect the Group's ability to deliver feedstock to its production

1 Calculated as a percentage of operating expenses before equity-settled share-based payment plans. - 16-

facilities, bring products to market, delay delivery times and increase its costs, which could have a material adverse effect on the Group's business, financial condition and results of operations.

The Russian Government sets rail tariffs for railway transportation through the FAS and reviews them from time to time. See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Transportation Tariffs". The Group expects that the railway transportation tariffs set by the FAS will continue to increase going forward, which could adversely affect prices paid by the end users of the Group's products, which, in turn, could affect demand for such products.

In addition, both the privatisation of Russian Railways and its cost of upgrading its railway network could further contribute to an increase in railway tariffs. If railway transportation prices continue to increase and the Group may be unable to make commensurate increases in its prices, the Group's operating margins could decrease, which could have a material adverse effect on its business, financial condition and results of operations.

The Group's operating expenses are also affected by the cost of rolling stock. In October 2018, the Group sold its LPG tank car fleet to PTC, a transportation joint venture in which the Group and SG-Trans, one of the country's major railway operators, own equal shares. As a result, the Group's transportation needs are fulfilled by PTC rather than internally. The change in costs of leasing rail cars may have a materially adverse impact on the Group's business, financial condition or results of operation.

Increase in electricity and heat prices could adversely impact the Group's financial results

The Group's business is energy-intensive. Electricity and heat account for the largest portion of the Group's energy costs. Operating costs at the Group's production facilities are sensitive to changes in the price of energy sources. In particular, prices for electricity can fluctuate widely due to availability and demand of other consumers as well as regulatory action.

The Russian electricity market has been liberalised gradually over recent years. However, maximum levels of electricity prices remain under the supervision of the FAS and regional regulatory authorities. One of the most important factors that influences electricity prices is fuel cost (primarily natural gas and coal) and increases in natural gas prices tend to result in higher electricity prices. The Group expects that electricity prices will continue to rise, which may result in increased costs for the Group and could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group sources heat energy in the form of steam and hot water from regional suppliers at regulated prices. Heat energy prices are also largely dependent on prices for domestic natural gas. If the domestic price for natural gas continues to rise, the Group's production costs may increase. In addition, due to the technological aspects of heat transmission, the supply of heat by Russian heat generation companies is restricted to customers located near the heat generation facilities (unlike the supply of electricity, which is based on transmission through federal and regional trunk transmission grids). As a result, the Group depends on the operation of heat generation companies located near its production sites and any disruptions in the operation of these companies resulting in their inability to supply heat energy to the Group may adversely affect the Group's operations in these regions. Any or all of these factors could have a material adverse effect on the Group's business, financial condition and results of operations.

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An increase in feedstock prices may result in increased operating expenses

The Group requires substantial amounts of feedstock, primarily APG and NGLs, for the production of its products. As a result, purchases of feedstock represent the largest portion of the Group's operating expenses. During the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016, the Group's expenses related to purchases of APG and NGLs accounted for 22.2%, 23.2%, 18.6%, and 15.8%2 of the Group's total operating costs, respectively.

The Group purchases APG, with the majority of the Group's planned APG supplies guaranteed under multi-year supply contracts, from major oil companies located in Western Siberia, at negotiated prices, which are dependent on a number of factors, including the quality and composition of APG in terms of target liquid fractions content, distance of an APG source from the Group's GPPs, availability of collection and transportation infrastructure. The prices are also influenced by the cost and effectiveness of the alternatives to selling APG to the Group available to oil companies in Western Siberia, such as the potential capital expenditures they would need to incur to construct their own gas processing capacity, the volumes of APG they can use for in-field injection or power generation and the penalties imposed on flaring. Currently, the Group has two types of APG purchase contracts: (i) contracts where the purchase price of the APG, once agreed upon in absolute terms, is regularly indexed to reflect changes in Federal Antimonopoly Service of Russia ("FAS") regulated prices for natural gas; and (ii) contracts where the APG purchase price is indexed in line with changes in prices for APG derivatives, including baskets of natural gas and raw NGL. If, among other factors, alternatives to selling to the Group become more viable or less costly or, the oil companies were to invest in the development of an APG processing capacity or infrastructure, the prices at which the Group is able to purchase APG could increase. In addition, while in the recent past the Russian Government has consistently introduced regulation to limit gas flaring, any changes to such regulation that could result in a less stringent regime could increase the price for APG the Group purchases from oil companies.

NGL feedstock is priced with reference to international prices for LPG and naphtha and, to a lesser extent, to domestic LPG prices. Because of the abundant supply of NGLs in Western Siberia where the Group's processing facilities are located and a substantial lack of NGL processing infrastructure in the region, prices for NGLs in Russia are determined on an export netback basis, which reflects transportation costs and export duties. As a result, the prices at which the Group has been able to purchase NGLs in Western Siberia are lower than those available to the majority of the Group's international petrochemical peers. See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Feedstock Sourcing and Mix". If transportation costs and/or export duties decline, or the demand for NGL's feedstock increases due to oil and gas companies developing more NGL processing infrastructure, the pricing advantage the Group enjoys as a result of the lower prices of NGLs in Western Siberia may be eroded.

If the Group is not able to pass feedstock price increase on to its customers to avoid adversely impacting its results of operations, the Group's business, financial condition and results of operations could be materially adversely affected.

In addition, the availability of sufficient volumes of APG and NGL feedstock on the Russian market significantly depends on the production volumes of a limited number of oil and gas companies. Therefore the supply of the feedstock required for the Group's operations is mainly concentrated on the several oil and gas producers. A reduction or cessation of supplies of feedstock from the Group's suppliers for any reason could increase the feedstock prices and, as a result, have a material adverse effect on the Group's business, financial condition or results of operations. See

2 Calculated as a percentage of operating expenses before equity-settled share-based payment plans. - 18-

also "— The Group is dependent upon long-term relationships with a limited number of third- party feedstock suppliers".

The Group's business and operations depend on the expertise of its key managers, as well as on its ability to attract, retain and motivate qualified personnel

The Group's growth and future success depend significantly upon its continued ability to attract, retain and motivate a number of key senior management and highly qualified and suitably skilled personnel at the Group's headquarters and at each production facility (see "Management"). Should any of the Group's management decide to leave the Group, it may be difficult to replace them promptly with other managers with sufficient expertise and experience. Under Russian law, employees can terminate their employment on two weeks' notice, with the exception of the CEO who is required to give one month's prior notice. The Group is not insured against damage that may be incurred in case of loss or dismissal of the Group's key senior managers. The loss of, and failure to replace, any one or more of these individuals could adversely affect the Group's business, financial condition or results of operations.

In addition, in its production operations, the Group requires technically skilled workers with specialised training who can perform physically demanding or otherwise difficult work. Competition to attract and retain qualified workers is intense in Russia and if the Group is unable to attract and retain such workers, its business would be adversely affected. In such a labour market environment, the Group may be unable to attract specifically trained personnel for its large-scale ZapSibNeftekhim project. Furthermore, if staff costs increase due to competition, wage inflation or otherwise, this may have a negative impact on the Group's profit margins. The above could have a material adverse effect on the Group's business, financial condition and results of operations.

Failure of the Group's external contractors and other third parties to perform their obligations could have a material impact on the Group's business and operations

The Group's operations depend to a significant extent on external contractors, including with respect to maintenance and construction, transportation and logistics services, energy and utilities. In addition, the Group depends on the provision of labour, equipment and services by third-party contractors. As a result, the Group's operations are subject to a number of risks, some of which are outside its control, including, but not limited to: failure of a contractor to perform under the agreement with the Group; significant delays in construction works, interruption of operations or increased costs in the event that a contractor ceases its business due to insolvency or other unforeseen circumstances; and failure of a contractor to comply with applicable legal and regulatory requirements, which could lead to fines, penalties, restrictions and withdrawal of licences or agreements under which the Group operates. In addition, the Group may incur liability to third parties as a result of the actions of the Group's contractors or sub-contractors, including potential environmental or other liabilities. The occurrence of one or more of these risks could have a material adverse effect on the Group's business, financial position or results of operations.

The Group's operations are also dependent upon particular equipment and services provided by its contractors or other third parties. High demand for particular equipment or services or access restrictions may affect the availability and cost of, and the Group's access to, such equipment and services and may delay its development and exploration activities. Failure by the Group, its contractors or other third parties to secure the necessary equipment or services could materially and adversely affect the Group's business, financial condition and results of operations.

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Disruptions in port services or increase in port servicing costs may adversely affect the Group's operations

The Group delivers LPG, naphtha, MTBE and certain other products to export markets through ports in a number of locations in Russia and abroad. Any limitations on, or disruption of, the port services that the Group uses, whether as a result of their capacity, strikes, lock-outs or other forms of labour unrest, as well as other events beyond the Group's control, could impair the Group's ability to supply products to its export customers and thus adversely affect the Group's results of operations. In addition, any increase in the costs associated with the use of port services or the assignment of loading or transhipment priority to other companies may adversely affect the Group's ability to meet obligations under the supply contracts. If the Group is forced to find a replacement of transportation through ports, it may result in additional costs, interruptions to delivery continuity or have other adverse effects on its business. Furthermore, severe weather conditions may force any of the ports that the Group relies on to suspend operations, thereby adversely affecting the Group's ability to deliver products to its customers in a timely manner or substantially increasing its transportation costs, all of which could materially adversely affect the Group's business, financial condition and results of operations.

The Group's manufacturing processes are complex and hazardous and subject to industrial and operating risks

The operation of the Group's production facilities involves the use of complex manufacturing processes and equipment that encompass the handling, production and transportation of highly hazardous, flammable, explosive and toxic materials. As a result, the Group's operations are exposed to a number of industrial accident risks, including fires, explosions, release of toxic fumes and other unexpected or hazardous conditions, including as a result of improper maintenance of the equipment, that could cause property damage, environmental damage, business interruptions, be detrimental to health or cause personal injuries or death, as well as result in administrative fines and potential legal liabilities. The Group's employees, as well as employees of the Group's service providers, suppliers and customers, and residents living in close proximity to the Group's production facilities, may be exposed to these hazards. Any of these hazards or accidents could result in unexpected production delays, reduced output, increased production costs and increased expenses to repair or replace the equipment or property, as well as claims from individuals affected by such hazards or accidents and environmental and other authorities for any alleged breaches of applicable laws or regulation. See "— Environmental and health and safety compliance and clean- up costs could have a material adverse effect on the Group's business, financial condition and results of operations".

The Group operates an integrated business comprising the Midstream segment, the Olefins and the Polyolefins segment and the Plastics, Elastomers and Intermediates segment. A significant part of feedstock for the Olefins and Polyolefins segment and the Plastics, Elastomers and Intermediates segment is supplied by the Group's Midstream segment for production of petrochemical products. Due to the integrated nature of the Group's production facilities, any problems that develop in the Group's Midstream segment may adversely affect the Group's Olefins and Polyolefins segment as well as the Plastics, Elastomers and Intermediates segment. Production problems of this type could cause disruptions at downstream facilities and result in temporary shutdowns and reduced production rates. For example, in January 2019 and October 2018, there were several unscheduled maintenance shutdowns at the Group's facilities in Tobolsk for approximately three weeks. As a result, the Group's production at its Tobolsk facility, and/or other facilities that may require unscheduled shutdowns and maintenance in the future, may be potentially reduced, which could have a material adverse effect on the Group's business, financial condition and results of operations.

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In addition, certain of the Group's production processes also rely on shared common utilities and infrastructure. Therefore, any technical failures or other adverse conditions affecting these shared utilities or infrastructure may adversely affect the Group's production at other production facilities, which could have a material adverse effect on the Group's business, financial condition and results of operations.

Furthermore, the Group's production facilities may be adversely affected by power shortages or outages. During periods of peak usage, supplies of energy may be curtailed. The occurrence of any of these factors may have a material adverse effect on the Group's business, financial condition or results of operations.

In addition, any new technologies that the Group may implement as part of the development of its facilities may not be successfully implemented or reveal deficiencies that could adversely affect the Group's production processes or lead to additional operating costs.

Any of the above factors or other factors that interrupt the Group's operations, or which cause the Group to incur significant expenses, could have a material adverse effect on the Group's business, financial condition and results of operations.

Accidents involving the handling and transportation of the Group's refined products, intermediates and feedstock could disrupt the Group's operations and subject it to environmental and other liabilities

The Group regularly transports its products over its network through a number of transportation means, which include pipelines, railways, trucks, port facilities and services of multimodal transportation operators. A significant part of the Group's transportation needs is met by its own infrastructure, which includes APG, natural gas and raw NGL pipelines. Accidents in the handling of its products could disrupt its operations. There can be no assurance that the Group's compliance with applicable environmental or health and safety regulations will prevent any such accident or resolve such incidents without damage to the Group's infrastructure or the Group's other assets, contamination or other environmental damage, reputational damage or personal injury. Although the risks to which the Group is exposed in connection with transportation of its products are insured, the relevant insurance coverage may be insufficient to entirely compensate the losses which the Group may incur as a result of major incidents involving transportation of the Group's products. Any failure to avoid, mitigate or resolve such incidents successfully or any such damage or contamination could adversely affect the Group's revenues, lead to reputational damage and/or subject the Group to liability in connection with environmental and personal damages, any of which could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group is subject to interest rate risk

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 RUB 350,103 million of total borrowings (excluding lease liabilities) outstanding, of which 69.0% was subject to variable 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, financial condition and results of operations. See also "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Macroeconomic and Other Economic Trends — Interest rates".

- 21-

Failure to implement its large investment project, ZapSibNeftekhim, and other investment projects may prevent the Group from realising the expected benefits of these projects

The Group is engaged in the implementation of investment projects which currently primarily relate to ZapSibNeftekhim. The Group is also evaluating other potential investment projects and may be engaged in other large capital expenditure projects and other joint-venture projects in the future (for further details, see "Business — Sales and Marketing" and "Business — Joint Ventures and Associates").

There are certain risks that ZapSibNeftekhim or any other project that the Group may undertake are adversely affected, delayed, terminated or will not be completed as planned as a consequence of a number of factors, including:

• the timing and cost of the construction of processing facilities;

• the availability and cost of skilled labour, transportation facilities, power, water and raw materials;

• regulatory constraints;

• timely and safe heavy-lift equipment delivery;

• restrictive covenants under the terms of the Group's indebtedness;

• the availability and cost of funds to finance these projects;

• difficulties with planned ramp-up;

• the need to obtain necessary environmental and other governmental permits and the timing of those permits; and

• other technical difficulties.

Technical and technological decisions made as part of the integration of new technologies or developing or enhancing existing systems, or assumptions used, during each stage of implementing ZapSibNeftekhim or the Group's other projects on the basis of the information available to the Group may reveal themselves to be wrong and, as a result, lead to operating costs being higher than originally estimated. For example, some unforeseen technical difficulties may arise during the start-up period and, as a consequence, result in an increase in the implementation costs.

In addition, procurement costs of these projects may also exceed the Group's planned investment budget. As a consequence of any delay in completing ZapSibNeftekhim or the Group's other capital expenditure projects, cost overruns, changes in market circumstances or other factors, the intended economic benefits from these capital expenditure projects may not materialise or the Group may not be able to make these capital expenditures at the times and in the amounts planned, and the Group's business, financial condition or results of operations may be materially adversely affected. Furthermore, there can be no assurance that the demand for the products intended to be produced by ZapSibNeftekhim or any other projects that the Group may undertake will materialise at the levels expected by the Group, which may also prevent the Group from realising the expected benefits of these projects.

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Disruptions in pipeline transportation could materially affect the Group's operations

APG that the Group purchases from oil and gas companies is transported to the Group's GPPs via point-to-point gas pipelines that are directly linked to the Group's GPPs. Most of these pipelines are owned by oil companies. A large portion of NGLs purchased from oil and gas companies and produced by the Group from APG are transported to the Group's GFUs by specialised raw NGL pipelines, owned by the Group. The Group's GPPs are also directly connected to Gazprom's UGSS through its own natural gas pipelines. See "Business — Transportation and Logistics".

These pipelines may experience outages resulting from ageing infrastructure, poor handling, technological difficulties, accidents, natural disasters, and other circumstances, which may result in delays in or prevent the Group from transporting feedstock. If the Group is forced to find alternative means of transportation of feedstock, it may result in additional costs, interruptions to delivery continuity or have other adverse effects on its business. The Group may also be unable to find alternative transportation services on a timely basis at acceptable cost or at all. As a result of any of the above, the Group's business, financial condition and results of operations could be materially adversely affected.

The Group requires a sustained cashflow generation to service its debt, sustain its operations and finance its capital expenditures, and its ability to generate sufficient cash depends on many factors beyond its control

The Group's ability to make payments on, or repay or refinance, its debt, and to fund working capital and capital investments, will depend on its future operating performance and its ability to generate sufficient cashflow. This depends on the success of the Group's business strategy (see "Business —Strategy") and various factors, many of which are beyond the Group's control, such as, for example:

• general economic and financial conditions (see, for example, "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Macroeconomic and Other Economic Trends");

• competitive landscape (see "— Competition from third parties may adversely affect the Group's results of operations" and "Business — Competition");

• market conditions (see, for example, "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Feedstock Sourcing and Mix — Pricing");

• legislative, regulatory, technical and other factors (see, for example, "Regulation of Gas Processing and Petrochemicals Business in Russia").

In line with its strategy, the Group plans to invest approximately RUB 253 billion net of VAT from 2019 to 2022. This amount comprises investment projects approved by the Strategy and Investments Committee of the Board of Directors and include capital expenditure to maintain the existing infrastructure as well as the capitalised portion of the Group's expenses related to R&D, organisational and IT projects. For more information, see "Business — Capital Expenditure".

The Group is funding its capital expenditures through internal sources and external financing. There can be no assurance, however, that the Group will be able to attract sufficient external funds to meet such capital requirements in the future at a reasonable cost. The Group depends on access to debt markets to meet a certain portion of its financing requirements. The Group's ability to - 23-

secure debt or equity financing in amounts sufficient to meet its financial needs could be materially adversely affected by many factors beyond its control, including, but not limited to, economic conditions in Russia and globally and the health of the banking sector and global capital markets. Additional financing through bank financing, issuances of equity or debt securities may not be available on terms that are satisfactory to the Group.

Insufficient cash flow generation from business operations and/or a lack of sufficient external funding would adversely affect the Group's competitiveness as well as its business, financial conditions or results of operations.

Covenants in the Group's financing agreements and Eurobonds may limit its operational flexibility, and breach of such covenants may negatively affect the Group's financial position

Certain of the Group's financing arrangements require it to maintain various financial ratios and contain restrictive covenants which may limit its ability or the ability of its subsidiaries to obtain loans, dispose of or acquire assets, execute contracts out of the ordinary course of business, or create security. Some of these financing arrangements also contain restrictive conditions imposing limitations on change of control, ownership, corporate structure, reorganisations and mergers.

Such covenants may limit the Group's operational flexibility, its ability to secure funding sufficient for the implementation of its capital expenditure programme or hinder the Group's ability to carry out its business strategy, which could have a material adverse effect on the Group's business, financial condition and results of operations. In addition, if the Group were to breach one of its covenants under one financing arrangement, this would trigger cross-default provisions under other financial arrangements of the Group. Any such default and/or cross-default would permit acceleration of amounts due under the financial arrangements, which could have a material adverse effect on the Group's business, financial condition and results of operations.

In addition, SIBUR is providing guarantees in favour of third parties securing obligations of certain subsidiaries and joint ventures of the Group, including, inter alia, in favour of financing organisations providing financing to such subsidiaries and contractors engaged by such subsidiaries. Default of the Group's subsidiaries under the respective underlying obligations may result in an obligation of SIBUR to pay the respective debt, which may affect its liquidity position and, in turn, could have a material adverse effect on SIBUR's and the Group's business, financial condition, results of operations and prospects.

The Group is affected by the general global economic and financial market conditions

The global economic environment is subject to a number of uncertainties, including, but not limited to, discontinuation of certain stimulus programmes, potential inflation, continuing high levels of unemployment in certain countries, political tensions over global trade of goods, labour and capital mobility, terrorism and concerns over the stability of the monetary and political union in the EU financial markets. In addition, financial market conditions and investment environment in the countries where the Group operates may be affected by ethnic, religious, historical and other divisions, military conflicts and acts of terrorism.

In June 2016, a majority of voters in the United Kingdom elected to withdraw from the EU in a national referendum. The British Government triggered the exit process on 29 March 2017. It is expected that the United Kingdom will officially leave the EU on 31 October 2019. There is a possibility of trade barriers resulting from the UK leaving the EU, which may affect the macroeconomic environment in Europe. The referendum has also given rise to calls for the governments of other EU member states to consider withdrawal.

- 24-

In addition, policies of Donald Trump, the president of the United States, have contributed to increased volatility in the financial markets and have led to greater uncertainty on the status of trade relations between the U.S. and some of its largest trade partners, including the U.S.'s existing trade agreements. The worsening of such trade relations, in particular between the U.S. and China, could result in recession in economies of these countries and have a knock-on effect on global trade and the economic environment.

Furthermore, China has recently seen a substantial decline in its rate of growth, which has contributed to a significant decline in commodity prices. There is a risk of a possible cyclical downturn in the Chinese economy and other developing markets and a stagnation of European and U.S. economies, which would result in a global economic downturn and impact the Russian economy in general and the Group's industry and business as a result.

These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to fund their capital and liquidity requirements and operate in certain financial markets. Any of these factors could depress economic activity, commodities markets and restrict access to capital. If the global economic conditions deteriorate, the resulting contraction in demand for many of the Group's products and the tightening of the credit markets could have a material adverse effect on the Group's business, financial condition, results of operations and the value of the Notes.

The Group may not be able to keep pace with technological developments in the petrochemical industry

The petrochemical industry is characterised by rapid and significant technological advancements and introductions of new products and services using new technologies, as a result technologies that are currently used by petrochemical companies may become obsolete in the future. For example, Chinese companies have worked intensely to evolve its technologies for the conversion of methanol, coal and gas to olefins. In terms of advantageous access to feedstock and low-cost production, the new technology for the conversion of coal to olefins (so-called "coal-to-olefins") located in Inner Mongolia, a Mongol autonomous region in northern China, may potentially compete with traditional pyrolysis methods. Nevertheless, the extension of this technology outside China is limited to the regions with access to inexpensive coal, therefore a wide application of the coal-to-olefins method in petrochemical production of most of the countries is currently limited. In addition, methanol-to-olefins ("MTO") and gas-to-olefins technologies may be considered competitive, in case there is a long-term "cheap" gas environment and expensive crude oil environment, due to low costs of methanol production as compared to high prices of traditional hydrocarbon raw materials (naphtha). Currently there are several prospective MTO projects in China, but the economics of production is quite vulnerable (sometimes negative) due to volatility of crude oil and gas prices. Other technological alternatives, such as new technologies for natural gas processing, for example oxidative dimerisation of methane (Siluria, Linde), direct conversion of natural gas to propylene (Tecnimont-Siluria) and Gas-to-Chemicals (UOP), are at the stage of laboratory studies or early commercialisation and cannot currently compete with the traditional pyrolysis methods. However, these technologies may potentially be considered as an alternative to MTO technologies in the future. Other alternative technologies under development include the application of biotechnology, as well as bioconversion technologies, and there can be no assurance that the obstacles to the deployment of these new technologies at large scale and in a cost-effective manner could not be overcome in the future.

Although the Group uses and develops new technologies (see for example, "Business — Overview of Business Segments — Olefins and Polyolefins Segment — ZapSibNeftekhim Investment Project" - 25-

as to expected introduction of new grades of PE and "Business — Research and Development (R&D)" as to the Group's strategic research aimed at creating new technologies and products), it may not be able to properly respond to the technological advancements in other countries or implement new technologies on a timely basis or even at all. In addition, it may be placed at a competitive disadvantage or may be forced by competitive pressures to implement those new technologies at substantial costs. In addition, any new technology that the Group implements may have unanticipated or unforeseen adverse consequences, either to the Group's business or the industries as a whole. If one or more of the technologies the Group uses now, or will use in the future, were to become obsolete, it may have a material adverse effect on the Group's business, financial condition and results of operations.

Failures of the Group's IT systems could negatively affect the results of operations

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 and a distortion of information during data transfers 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, physical damage to vital IT centres and computer virus infection. Due to the recent rise of incidents of hacking and cyber security leaks globally, the risk of breaches to the Group's cyber security has increased. 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. The Group has invested in upgrading its technologies, centralising its information systems and controlling the operation of its hardware and software, taking into account international best practices. For example, the Group's supply chain management optimisation system (the "SCM system") is an information technology system based upon the AspenTech Distribution planning optimiser (currently the Aspen Petroleum Supply Chain Planner), an industrial solution system, designed to help the planning of the Group's production and distribution flows through generating solutions to transport optimisation problems. However, the Group cannot provide any assurance that its IT systems will continue to function in a manner that will not result in significant disruptions or temporary loss of functionality. Any of these factors could materially adversely affect the Group's business, financial condition and results of operations.

The Group's ability to operate its business depends on its ability to protect the computer systems and databases from the intrusion of third parties who attempted in the past, and may attempt in the future, to gain access to the Group's computer systems, networks or databases through the Internet or otherwise. Although the Group believes that its computer systems, networks and databases are well-protected from unauthorised access, given the potential technical and financial resources of intruders, full assurance cannot be given that its computer systems, networks and databases will not suffer from such attacks in the future. Any attack on the Group's IT systems could have a material adverse effect on the Group's business, financial condition and results of operation.

If the FAS were to conclude that the Group conducted its business in contravention of antimonopoly legislation, it could impose sanctions on the Group

As the Group seeks greater penetration of local markets, including through the launch of ZapSibNeftekhim, as described in "Business — Capital Expenditure", the Group may be subject to FAS inquiries in connection with its market share. As a result, the Group may be required to comply with certain obligations imposed on it to ensure that it does not restrict competition in this market. This may include obligations to obtain the prior consent of the FAS for certain actions and to ensure that the Group's prices are at certain prescribed levels. For example, in the past, the FAS imposed certain obligations on the Group requiring it to act in a manner to ensure that it does not - 26-

restrict competition in the relevant product market. If the Group is not in compliance with any obligations imposed on it by the FAS, the FAS may, through its regulation of the Group's business, significantly affect contractual terms and the prices the Group charges for its products, all of which could have a material adverse effect on its business, financial condition and results of operations.

As a result of the Group's significant position on the market, the Group regularly receives inquiries and requests from the FAS in connection with its operations. Such inquiries and requests may lead to investigations of the Group's operations which could result in the FAS determining that certain actions of the Group violate applicable Russian antimonopoly legislation. Given that Russian antimonopoly laws are subject to differing interpretations, the Group may be unable to successfully challenge determinations made by the FAS in relation to the Group, which could result in sanctions for the Group, including administrative fines imposed on the Group as well as criminal liability for the Group's managers. As a result, the Group's business, financial condition and results of operations may be materially adversely affected.

The Group's products may become subject to anti-dumping or countervailing duties, import quotas or tariffs in various countries, which may have a material adverse effect on the Group's export sales

The Group exports a substantial portion of its products. For the six months ended 30 June 2019 and for the years ended 31 December 2018, 2017 and 2016, the Group's export sales accounted for 43.5%, 41.4%, 42.2% and 42.2% of its total revenues, respectively. The imposition of anti- dumping or countervailing duties, import quotas or tariffs, whether adopted by individual governments or addressed by regional trade blocs, may impact the competitive position of the products produced by the Group or prevent it from being able to sell its products in certain countries, which could have a material adverse effect on the Group's business, financial condition or results of operations.

The Group may lose certain tax benefits and subsidies it currently receives in certain regions in which it operates

The Group is a recipient of certain tax benefits and subsidies in some of the regions in which it operates. Some of these benefits were provided to the Group by the subjects of the Russian Federation through implementation of the incentives, such as reduced income tax rate for business units operating on the relevant region's territory. However, in the middle of 2018, certain amendments aimed at reducing the authority to stipulate preferential corporate profits taxation at the regional level have been introduced into the Russian legislation. Thus, reduction of the corporate profits tax rate at the regional level would be available solely for specific types of taxpayers, which will be defined by the federal law. Current reduced regional profit tax rates will remain in effect by 1 January 2023, the latest. Although rescission of incentives in question is not expected to entail any significant effect towards the Group's overall operation, there can be no assurance that cancellations, withdrawals or material alterations of other tax benefits and subsidies, should they occur, will not have a material adverse effect on the Group's business, financial condition and results of operations.

Suspension of cooperation by regional and federal authorities may adversely affect the Group's business

As a major investor in infrastructure and social projects in the regions in which it operates, the Group has signed cooperation agreements with a number of regional and federal authorities, including investment and financial support agreements.

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At the regional level, under these agreements, the Group, subject to certain conditions, is entitled to a partial refund of capital expenditures and finance expenses incurred in the respective regions. Such refunds are made, either in the form of an income tax rebate or a direct grant of public funds, after the Group submits appropriate supporting documents to the relevant regional authority.

In addition, at the federal level, the Group has received USD 1,750 million from Russia's National Wealth Fund in the form of 15-year bonds that the Group placed to the Russian Federal Ministry of Finance, as described in "Operating and Financial Review — Liquidity and Capital Resources — Borrowings".

As a result of these agreements, the Group is subject to inspections, monitoring and audit by the State Audit Chamber ("Schetnaya Palata") or the Ministry of Economic Development of the Russian Federation ("Ministry of Economic Development"), which reviews the Group for compliance with the terms and conditions of such agreements. In the case of the Group's non- compliance with its obligations revealed by Schetnaya Palata or by the Ministry of Economic Development during the inspections, monitoring or audit the Ministry of Finance is entitled to dispose of the bonds or demand the repayment of the funds. Such cases may also result in negative publications in media which could have a material adverse effect on the Group. In connection with the Group's agreements with the regional authorities, in the event of non-compliance with the obligations, the regional authorities may claim for restitution and refund of subsidies.

Should such agreements be terminated or their provisions materially amended, including as a result of any changes in policies of the relevant authorities or non-compliance with any provisions of the agreements, the Group's business, financial conditions and results of operations could be adversely affected.

The Group could fail to obtain or renew necessary licences or fail to comply with the terms of its licences

In accordance with Russian law, many of the Group's operations are subject to regulatory regimes, including licensing, which requires the Group to obtain a number of licences, permits and authorisations (collectively, "licences"), including various environmental, health and safety licences, authorisations to use land and other real property and certain ancillary authorisations. Regulatory authorities exercise considerable discretion in the timing of licence issuance and renewal and in monitoring of licencees' compliance with licence terms. Requirements imposed by these authorities may be costly and time-consuming and may result in delays in the commencement or continuation of production operations.

As part of its obligations under licencing regulations and the terms of its licences, the Group is also required to comply with numerous industrial standards. In most cases, a licence may be suspended or terminated if the licencee does not comply with the "significant" or "material" terms of the licence. Court decisions on the meaning of these terms have been inconsistent and, under Russia's civil law system, do not have significant value as precedents for future judicial proceedings. These deficiencies result in the regulatory authorities, prosecutors and courts having significant discretion over enforcement and interpretation of the law, which may be used arbitrarily to challenge the rights of licences. As a result, while the Group seeks to comply with the terms of its licences and Management believes that the Group is currently in material compliance with the terms of such licences, there can be no assurance that its licences will not be suspended or terminated. In the event that the licencing authorities in Russia discover a material violation by a subsidiary of the Group, that subsidiary may be required to suspend its operations or to incur substantial costs in eliminating or remedying the violation, which could have a material adverse effect on the Group's business, financial condition and results of operations.

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Any failure to comply with existing licence terms or sanctions imposed as a result of such failure, including the potential suspension or loss of any licences, or any difficulties the Group may face in obtaining the required licences, may have a material adverse effect on the Group's business, financial condition and results of operations.

The Group may fail to successfully integrate any assets that it may obtain through acquisitions

The Group has in the past expanded, and in the future may continue to expand, its business through selective acquisitions. Acquisitions involve a number of risks, such as difficulties in developing the operations, technologies and procedures of the acquired assets. In addition, additional assets that the Group may acquire may not be integrated successfully into the Group's operations. They may also disrupt the Group's continuing business and divert resources and management's attention from other business concerns. If the Group is unable to carry out its acquisitions successfully, its business, financial condition or results of operations may be materially adversely affected.

The Group conducts several of its operations through joint ventures and associates which may limit the Group's influence over and, in certain cases, the profitability and reputation of those operations

The Group participates in several joint venture and associate arrangements and may enter into further joint ventures in the future. As of the date of this Prospectus, some of the Group's joint ventures and associates include:

• a 50% interest in RusVinyl LLC ("RusVinyl"), a joint venture arrangement established for the development of a polyvinyl chloride ("PVC") and caustic soda production facility in Kstovo, the Nizhny Novgorod region, with the remaining 50% owned by SolVin Holding Nederland B.V.;

• a 50% interest in Yuzhno-Priobskiy GPP LLC, a GPP in the Khanty-Mansiysk Autonomous District based on the Yuzhno-Priobskaya compressor station, with the remaining 50% owned by Gazpromneft Khantos LLC, a member of the Gazprom Neft Group;

• a 50% interest in NPP Neftekhimia, a PP producer based in Moscow, with the remaining 50% owned by JSC Gazpromneft Moscow Refinery, a member of the Gazprom Neft Group;

• a 50% interest in Sibgazpolimer JSC, a special purpose vehicle established for investing in Poliom LLC ("Poliom"), with the remaining 50% owned by GPN-finance LLC, a member of the Gazprom Neft Group;

• a 25.1% interest in Reliance Sibur Elastomers Private Limited, an associate established for the development of a butyl rubber ("IIR") production facility in India, with the remaining 74.9% owned by Reliance Industries Limited;

• a 50% interest in Petrochemicals Transportation Company LLC (PTC), a transportation joint venture, with the remaining 50% owned by SG-Trans JSC ("SG-Trans");

• a 50% interest in Salavatsky Neftehimichesky Kompleks LLC, a trading company based in Saint-Petersburg with the remaining 50% owned by Gazprom Neftekhim Salavat LLC (member Gazprom Group). - 29-

For more detailed information on the Group's principal projects, see "Business — Joint Ventures and Associates".

Although the Group has, in relation to its existing and potential joint ventures and associates, sought to protect its interests, joint ventures and associates necessarily involve special risks. Whether or not the Group holds majority interests or maintains operational joint control, the Group's partners may have inconsistent or opposing economic or business interests or goals, exercise veto rights so as to block actions that the Group believes to be in its or the partnership's or joint venture's best interests, take action contrary to the Group's policies or objectives with respect to its investments or, as a result of financial or other difficulties, be unable or unwilling to fulfil their obligations under the joint venture or other agreements, such as contributing capital to development, expansion, production or maintenance projects.

Where projects and operations are controlled and managed by the Group's partners, the Group may provide expertise and advice, but have limited control with respect to compliance with its standards and objectives. This lack of control may constrain the Group's ability to cause its partners to take an action that would be in the Group's best interests or refrain from taking an action that would be adverse to its interests. While, to date, the Group has not had any significant disagreements with its partners, any potential conflict or dispute which may arise between the partners to the Group's undertakings could lead to significant delays or interruptions in operations or dissolution of these joint ventures and associates causing increased costs to the Group for obtaining products produced by joint ventures and associates through other sources and reducing profitability of the Group's operations, any of which could have a material adverse effect on the Group's business, financial condition and results of operations.

In addition, changes in the ownership or management structure of existing or future joint ventures and associates and the effect of any such change or failure to conduct business as planned could have a material adverse effect on the Group or investments in its existing or future partnerships and joint ventures. Moreover, improper management or ineffective policies, procedures or controls could adversely affect the value of the related non-managed projects and operations and, by association, damage the Group's reputation and thereby harm other operations and access to new assets and could have a material adverse effect on the Group's business, financial conditions or results of operations. See also "— Sanctions against Russia, its industries and/or individuals may have a material adverse effect on the Russian economy and the Group".

The Group may not be able to protect adequately or enforce its intellectual property rights

The Group relies primarily on a combination of patents, registered trademarks, licensing agreements and restrictions on disclosure to protect the Group's intellectual property. The Group has had approximately 143 patent applications in the last three years (see "Business — Research and Development (R&D)" and "Business — Intellectual Property"). Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use the Group's developed techniques, products, processes, brand names or other intellectual property without authorisation. In addition, certain inventions and trademarks of the Group have not yet been registered with the relevant Russian and foreign authorities and are therefore currently not protected from infringements, which is characteristic of all companies (both Russian and foreign). There may also be technologies licensed to, and relied on by, the Group that are subject to infringement or other corresponding allegations or claims by third parties which may damage the Group's ability to rely on such technologies. Russia generally offers less intellectual property protection than some more developed market economies such as the European Union or the United States. If the Group is unable to protect its proprietary rights against infringement or misappropriation, it could materially harm its future financial results and the ability to develop the Group's business. In addition, the Group may need to engage in litigation in order to enforce the Group's intellectual property rights - 30-

in the future or to determine the validity and scope of the rights of others. Any litigation could result in substantial costs and diversion of management and other resources, either of which could have a material adverse effect on the Group's business, financial condition or results of operations.

The Group has engaged, and its management expects it to continue to engage, in related party transactions

The Group has engaged in transactions with its principal shareholders, companies controlled by the principal shareholders or in which the principal shareholders own an interest, and other related parties (see "Related Party Transactions"). The Group's management expects that the Group will continue to enter into related party transactions in the future. While the Group's management currently expects that related party transactions will be conducted on an arm's length basis, conflicts of interest may nevertheless arise between the Group and its related parties, which could have a material adverse effect on the Group's business, financial condition and results of operations.

Environmental and health and safety compliance and clean-up costs could have a material adverse effect on the Group's business, financial condition and results of operations

The Group's business involves the transportation, handling, production and use of substances and compounds that may be considered toxic or hazardous within the meaning of environmental laws. Furthermore, the Group's manufacturing operations generate gaseous chemical wastes (including "greenhouse" gases), liquid wastes, wastewater and other industrial wastes at various stages of the manufacturing process. As a result, the Group is subject to stringent environmental, health and safety laws and regulations addressing air pollutant emissions and discharge of treated wastewater and establishing standards for the treatment, storage and disposal of solid and hazardous wastes. Some of these laws and regulations require the Group's facilities to operate under permits and licences that are subject to renewal or modifications.

In recent years, the issue of environmental protection and, in particular, limiting climate change, has become increasingly important. For example, the Paris Agreement, reached at the 2015 UN Climate Change Conference, commits its signatories (which include Russia) to limit climate change to two degrees Celsius by reference to pre-industrial temperatures. As governments introduce new environmental protection and climate change limitation regulations, any failure by companies to address their impact on the environment is likely to become increasingly expensive to them. Russian environmental legislation consists of numerous federal and regional regulations that occasionally conflict with each other and are subject to differing interpretations. In addition, introduction of new laws and regulations, stricter enforcement of, or changes to, existing laws and regulations, or the imposition of new clean-up requirements could require the Group to incur additional costs. These costs may include expenditures to install new pollution-control equipment, pay fees and fines or make other payments for discharges or other breaches of environmental standards relating to the Group's operations. For example, amendments to the federal law No. 416- FZ "On Water Supply and Wastewater Management" and related legislation that came into force from 1 January 2019 may result in higher wastewater related costs at some of the Group's facilities. The Group's operations could also expose it to civil claims by third parties for alleged liability resulting from contamination of the environment or personal injuries caused by environmental damage.

The Group is also subject to regular and, occasionally, unscheduled inspections by Russian supervisory authorities with respect to its compliance with relevant environmental, health and safety laws and regulations, including by the Federal Service for Environmental, Technological and Nuclear Supervision ("Rostekhnadzor"), the Federal Service for Supervision of Natural Resource Usage ("Rosprirodnadzor") and the Ministry of the Russian Federation for Civil - 31-

Defence, Emergencies and Elimination of Consequences of Natural Disasters. From time to time, these inspections reveal minor non-compliance with such laws and regulations. In the past, the Group has managed to cure most of the claims relating such non-compliance within the timeframe required by the state authorities and it has not been subject to any material liability resulting from such non-compliance, including any such material liability associated with any remediation of resettlement costs. However, there can be no assurance that the supervisory authorities will not impose more significant penalties on the Group, including suspension of the Group's operating activities for any similar non-compliance in the future or that the Group will be able to cure any revealed non-compliance within the timeframes required by these authorities. Any actions taken or threatened to be taken by the Russian supervisory authorities in respect of the Group's operations for breach of environmental, health and safety laws and regulations could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group incurs and expects to continue to incur capital and operating costs to comply with environmental and health and safety laws and regulations. These include costs to reduce certain types of air emissions and discharges to the waterways, to remediate contamination at various owned facilities or to resettle residents of areas impacted by the emissions and discharges from the Group's production facilities. Pollution risks and related remediation costs are often impossible to assess unless environmental audits have been performed and the extent of liability under environmental laws is clearly determinable. Under Russian law, production enterprises are required to establish a sanitary protection area surrounding their production sites to ensure protection of nearby territory from negative environmental impact that such production sites may have. If a sanitary protection area is extended to residential areas, the relevant production enterprise may be required to resettle inhabitants of such areas. The Group has undertaken all possible measures to decrease the environmental impact its production sites may have on nearby residential territories, including through financing of resettlement of residents living in the premises located in these sanitary protection areas. If such measures prove to be insufficient or if the Group is required to take additional measures to decrease the environmental impact of its sanitary protection areas, the Group may incur additional costs, which could have a material adverse effect on the Group's business, financial condition and results of operations.

In the event that the title to any company acquired by the Group through privatisation, bankruptcy sale or by other means is successfully challenged, the Group may lose its ownership interest in that company or its assets

The Group has been established through privatisation and bankruptcy proceedings. In addition, the Group may seek to acquire additional companies that have been privatised or that have undergone bankruptcy proceedings. Privatisation legislation in Russia is vague, internally inconsistent and in conflict with other elements of Russian legislation, Russian bankruptcy legislation is subject to differing interpretations. Although the statute of limitations for challenging transactions entered into in the course of privatisations is currently three years, privatisations may still be vulnerable to challenge, including through selective action by governmental authorities motivated by political or other extra-legal considerations. If any of the Group's acquisitions is challenged as having been improperly conducted and the Group is unable to successfully defend itself, the Group may lose its ownership interests, which could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group is required to consider and ensure the sustainable development of, and provide benefits to, the communities in which it operates

As a consequence of the Group's leading market position and the perception that its activities have a high impact on the social and physical environment in which it operates, the Group faces public scrutiny of its activities. In particular, the Group is under pressure to demonstrate that, as it seeks - 32-

to generate satisfactory returns on investment to its shareholders and other stakeholders, including employees, communities surrounding operations and the country in which the Group operates, benefit and will continue to benefit from the Group's commercial activities. The Group has tried to address such pressures, in part by maintaining positive relationships with local authorities and communities and supporting the development and maintenance of the social infrastructure, in particular, by entering into social partnership agreements with the authorities of the regions and cities where the Group operates. See "Business — Community Development". Under these agreements, the Group organises and finances a variety of community developments, humanitarian and environmental projects, infrastructure developments and maintenance and provides support to schools, kindergartens and leisure centres. However, the potential consequences of such pressures, especially if not effectively managed, include damage to the Group's reputation and could have a material adverse effect on the Group's business, financial condition or results of operations. Such development and maintenance efforts have been and may (continue to) require significant capital contributions by the Group and may require the attention of its management.

The Group's business could be adversely affected by product risks related to the implementation of the European regulation concerning the Registration, Evaluation and Authorisation of Chemicals

The EC Regulation 1907/2006 on Registration, Evaluation and Authorisation of Chemicals ("REACH Regulation") came into force in the European Union on 1 June 2007. It establishes an EU regulatory framework for the registration, evaluation and authorisation of chemical products and is intended to make persons who place chemicals on the EU market responsible for understanding and managing the risks associated with their use. The REACH Regulation applies to certain products produced by members of the Group to the extent that they are imported into the EU, and representatives have been appointed to relieve importers into the EU of obligations that they would otherwise have under the REACH Regulation in relation to such products. See "Regulation of Gas Processing and Petrochemicals Business in Russia — EU REACH". It remains possible that the ongoing and future costs associated with compliance, or non-compliance, with the REACH Regulation may have a material adverse effect on the Group's business, financial condition and results of operations.

A breakdown in the Group's relations with employees and/or restrictive labour laws could have a material adverse impact on the Group

Although the Group believes its labour relations with its employees are good and there have been no major disputes between the Group and its employees in recent years, there can be no assurance that a work slowdown or a work stoppage will not occur at any of the Group's production facilities. At most of the Group's business units, there are collective bargaining agreements in place. Any future work stoppages and disputes with employee unions, including renegotiation of collective bargaining agreements, could result in a decrease in the Group's production levels and adverse publicity, which could have a material adverse effect on the Group's business, financial condition and results of operations.

Risks associated with the Group's accounting and reporting systems and the internal controls relating to the preparation of IFRS financial information, including the use of estimates and judgements in applying accounting policies

As the Group continues to develop its financial reporting system, it seeks to identify and mitigate any risks promptly. Lack of fully automated and integrated financial reporting processes may nevertheless adversely affect reported data related to the Group's business, results of operations and financial condition. The Group has been preparing its IFRS financial information since 2005, and historically the Group has not experienced material delays in the preparation of its IFRS - 33-

financial information. In 2010, the Group centralised its accounting function for a majority of subsidiaries into SIBUR-Business Service Center LLC, which has been merged into the Management Company in 2018.

In light of the Group's past and planned growth, it continues to automate processes where possible. Several years ago, the Group invested significantly in the implementation of a new accounting system for the Group based on SAP software ("SAP"), and from 1 January 2015, the Group's consolidated financial statements and management accounts were prepared in SAP. Currently, the Group is in the process of SAP implementation for the remaining Group entities and alignment of manual internal controls with automated solutions in SAP.

Notwithstanding the above, the Group does not yet have a fully integrated or automated information system for the preparation of IFRS financial data, and consequently a fully developed system of internal controls over IFRS financial reporting, as several Group companies are still accounted in other accounting systems. In some cases the Group may lack formal procedures for monitoring transactions, collecting and analysing financial and related information required for the preparation of accurate IFRS financial data, or any such procedures that have been established may be underdeveloped.

In addition, preparation of the Group's financial statements requires the use of certain accounting estimates and judgements which, by definition, may differ from actual results. The quality of these estimates depends upon many factors such as available information systems, expertise of the management of the Group and the quality of market forecasts. One of the areas where significant management judgement is applied is recognition of revenues and expenses related to construction contracts which is a growing non-core activity of the Group representing the business of JSC NIPIgaspererabotka ("NIPIGAS") (for more details on the accounting treatment of construction contracts of NIPIGAS, see "Operating and Financial Review — Significant Accounting Policies and Critical Accounting Estimates and Judgements"). The Group recognises revenue for such contracts over time using the input method and applies judgement over the expected costs to be incurred until project completion. If circumstances arise that may change the original estimates of revenue (which is generally fixed in the contract with minor variable components), costs or the extent of progress toward completion, the estimates are revised. These revisions may result in increases or decreases in estimated revenues and total costs and are reflected in profit or lost in the period in which the circumstances that give rise to the revision become known by the Group's management.

RISKS RELATING TO RUSSIA

SIBUR 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.

Political, Economic and Social Risks

Emerging markets such as Russia are subject to greater risks than more developed markets

Investors in emerging markets such as Russia should be aware that these markets are subject to greater risks than more developed markets, including, in some cases, significant legal, economic, political and social risks. Moreover, financial turmoil in any emerging market country tends to adversely affect the financial condition of all emerging market countries, as investors move their money to more stable, developed markets. As has happened in the past, financial problems, or an increase in the perceived risks associated with investing in emerging economies, could dampen foreign investment in Russia and adversely affect the Russian economy. During such times, - 34-

companies that operate in emerging markets can face severe liquidity constraints as foreign funding sources are withdrawn. Thus, even if the Russian economy remains relatively stable, financial turmoil in any emerging market country could have an adverse effect on the Group's business, financial condition or results of operations.

Investors should also note that emerging economies such as the economy of the Russian Federation are subject to rapid change, and that the information set out herein 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 in the Notes is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who are familiar with and fully appreciate the significance of the risks involved in investing in such markets, and prospective investors are urged to consult with their own legal and financial advisors before making an investment in the Notes. Moreover, financial turmoil in any emerging market tends to adversely affect prices in debt and equity markets of all emerging markets, as investors move their money to more stable, developed markets.

Political and governmental instability could have a material adverse effect on the value of investments in Russia, including the Notes, as well as the Group's business, financial condition and results of operations

There are a number of risks associated with operating in Russia, where most of the Group's fixed assets are located.

Political conditions throughout the Russian Federation were highly volatile in the 1990s, as evidenced by the frequent conflicts among executive, legislative and judicial branches of government, which negatively impacted Russia's business and investment climate. Although the political situation in Russia has stabilised since 2000, future political instability could result in a worsening overall economic situation, including capital flight and a slowdown of investment and business activity. On 18 March 2018, President Vladimir Putin was re-elected for his second consecutive term.

Russia is a federative state consisting of 85 constituent entities, or "subjects". The Russian Constitution reserves some governmental powers for the federal government, some for the subjects and some for areas of joint competence. The delineation of authority among and within the subjects is, in many instances, unclear and contested, particularly with respect to the division of tax revenues and authority over regulatory matters. Subjects have enacted conflicting laws in areas such as privatisation, land ownership and licensing. For these reasons, the Russian political system is vulnerable to tension and conflict between federal, subject and local authorities. This tension creates uncertainties in the operating environment in Russia, which may prevent businesses from carrying out their strategy effectively, and, as a result, could have a material adverse effect on the Group's business, financial conditions or results of operations.

Also, in July-August 2019, tens of thousands of people have demonstrated in central Moscow in support of the opposition candidates that were barred from running for Moscow's legislature on the grounds that they failed to collect enough genuine signatures of support. Any political instability could affect the operating and investment environment in Russia, which in turn could have a material adverse effect the Group's business, financial conditions or results of operations.

Deterioration of Russia's relations with other countries could negatively affect the Russian economy and those of neighbouring regions

Over the past several years, Russia has been involved in conflicts, both economic and military, including conflicts with neighbouring states. On several occasions, this has resulted in the - 35-

deterioration of Russia's relations with other members of the international community, including the United States and various countries in Europe. Many of these jurisdictions are home to financial institutions and corporations that are significant investors in Russia whose investment strategies and decisions may have been affected by such conflicts and by the worsening relations between Russia and its immediate neighbours. For example, political instability and deteriorating economic conditions led to a wide-scale crisis in Ukraine in late 2013 early 2014. As a result of this, in March 2014, following a public referendum, the Crimean Peninsula and the city of Sevastopol became new separate constituent entities of the Russian Federation. The events relating to Ukraine and Crimea have been strongly opposed by the EU and the United States, with a resulting material negative impact on their relationships with Russia.

In addition, Russia's involvement in the armed conflict in Syria since September 2015 has occasionally put, and may continue to put pressure on international relations between Russia and certain other countries. Russia's involvement in the conflict in Syria could further lead to an escalation of geopolitical tensions, the possible introduction or expansion of international sanctions against Russia by other countries, and an increased risk of terrorist attacks.

The emergence of new or an escalation of existing tensions between Russia and neighbouring and other states could negatively affect the Russian economy. This, in turn, could result in a general lack of confidence among international investors in the region's economic and political stability and in Russian investments generally. Such lack of confidence could result in reduced liquidity, increased trading volatility and significant declines in the price of listed securities.

Economic instability could have a material adverse effect on the Group's business

The Russian economy has been subject to abrupt downturns in the past and continues to be under economic pressure. As Russia produces and exports large quantities of crude oil, natural gas, metal products and other commodities, its economy is particularly vulnerable to fluctuations in the prices of commodities on the world market.

The Russian economy faced a number of serious challenges from 2014 to 2016. In the period between July 2014 and the end of 2015, crude oil prices decreased significantly, which caused a shock to the Russian economy and contributed to a sharp depreciation of the Rouble against the U.S. dollar. The global benchmark Brent crude oil price decreased from USD 111 per barrel as of 4 July 2014 to USD 56 per barrel as of 31 December 2014, and to USD 37 per barrel as of 31 December 2015. As of 30 June 2019, the Brent crude oil price was USD 66. There can be no assurance that oil price will recover to previous levels. See "Operating and Financial Results — Significant Factors affecting the Group's Results of Operation — Crude Oil, Raw NGL, LPG and Naphtha Prices".

Following the stabilisation of the financial market, the CBR has gradually reduced the key rate, lowering it from 17.0% in 2014 to 7.25% in March 2018 and then increased it to 7.75% in December 2018. On 26 July 2019, the key rate was reduced to 7.25%. As a result of high volatility in the financial markets generally, as well as the CBR's actions in particularly, the cost of funding for Russian companies was also volatile. However, there can be no assurance that the CBR will not increase the key rate in case of further volatility of the Rouble or other macroeconomic factors.

In addition, the geopolitical tensions that began in March 2014 with respect to Ukraine led to economic sanctions being imposed on certain Russian individuals and companies by, among others, the EU and the U.S. Against the background of this tension, investors have become more cautious about investing in Russia. The ongoing deterioration of the Russian economy has had a negative impact on consumer confidence and could have a material adverse effect on the Group's business, financial condition and results of operations. - 36-

Sanctions against Russia, its industries and/or individuals may have a material adverse effect on the Russian economy and the Group

The political instability and conflict in Ukraine, heightened levels of tension between Russia and other countries, the imposition by the U.S., the EU and other states of sanctions and restrictive measures against Russia, and the imposition by Russia of counter-measures, including import and travel restrictions and possible counter sanctions under the Federal Law "On measures of effect (counteraction) in connection with unfriendly actions of the United States and/or other foreign states" No. 127-FZ dated 4 June 2018, have had in the past, and may continue to have in the future, an adverse effect on the Russian economy and the Group.

In response to the perceived role of the Russian Federation in events in Ukraine and Crimea, the U.S. and the EU (as well as a number of other nations) imposed sanctions on certain Russian and Ukrainian persons and entities. A number of Russian government officials, entrepreneurs, banks and companies, as well as companies owned or controlled by such persons or entities or certain entities that allegedly assisted with prohibited actions by such entities or persons have been included on the Specially Designated Nationals and Blocked Persons List ("SDN List") maintained by the U.S. Office of Foreign Assets Control ("OFAC") and are subject to blocking sanctions. The sanctions imposed freeze all assets of the blocked persons and broadly prohibit transactions or other dealings (including the provision of services) for the benefit of the sanctioned persons, in each case involving U.S. persons or any actions which directly or indirectly involve U.S. persons or U.S. territory (including the clearing of U.S. dollar payments through the U.S. financial system). This sanctions regime also extends by operation of law to any entity directly or indirectly owned 50% or more in the aggregate by one or more blocked or designated persons.

Since 2014, OFAC has added a number of Russian entities and individuals to the SDN List. On 6 April 2018, OFAC added 38 Russian business persons, officials and entities, some of which are entities with securities listed on the London Stock Exchange, the Hong Kong Stock Exchange and/or the Moscow Stock Exchange to the SDN List (three of the entities were subsequently removed from the SDN List on 27 January 2019). On 8 November 2018, the United States imposed additional sanctions in response to the accession of the Republic of Crimea to the Russian Federation and the situation in the Donetsk and Luhansk regions by designating three individuals and nine entities, most of which are operating in the Republic of Crimea. On 19 December 2018, the United States designated 18 Russian individuals and four Russian entities as SDNs for allegedly engaging in activities such as acting on behalf of a previously-designated individual SDN, seeking to interfere in political and electoral systems worldwide, interfering in U.S. elections and engaging in malicious cyber activity. Additional designations occurred in 2018 and in early 2019.

In addition, the U.S. and EU have applied "sectoral" sanctions, whereby entities in certain sectors of the Russian economy are designated as potential targets for sanctions. Currently, such sectors include defenсe and related materials, financial services and energy. The relevant sectoral sanctions currently provide for restrictions on transactions with new debt or equity of designated entities in the financial sector, restrictions on transactions with new debt of designated entities in the energy sector, restrictions on transactions with new debt of designated entities in the defence sector, and restrictions on the provision of goods, services or technology in support of Arctic offshore, deep-water or shale projects with the potential to produce oil. The U.S. has also significantly tightened export controls on the provision of U.S.-origin goods that may be used in the Russian defenсe or energy sectors.

On 2 August 2017, President Trump signed into law the Countering America's Adversaries Through Sanctions Act ("CAATSA") that includes additional sanctions against Russian entities. CAATSA, inter alia, (i) codifies the existing sanctions against Russia established by former - 37-

President Obama's executive orders, (ii) reduces the permitted terms of financing under the existing sectoral sanctions and further restricts supplies of equipment to certain Russian energy companies, (iii) allows the U.S. President to extend sectoral sanctions to further sectors of the Russian economy (such as railways, mining and metals) and introduce additional sanctions against new persons, (iv) provides for imposing a set of "secondary sanctions", which target activities of non-U.S. persons, such that foreign persons who engage in certain activities in Russia (in relation to, inter alia, construction, modernisation and repair of energy export pipelines, intelligence and defence sectors, sanctions evasion, privatisations and activities that undermine the cybersecurity of any person or government) now face the prospect of adverse economic consequences from the United States in the form of a denial of U.S. benefits. CAATSA also requires the U.S. administration to submit various reports to the U.S. Congress, including reports on oligarchs and parastatal entities (submitted on 29 January 2018 under Section 241 of the CAATSA (the "Section 241 Report")), on the effects of expanding sanctions to include sovereign debt and derivative products, and on illicit finance, which could lead to further sanctions. The sanctions package may have a material adverse effect on the Russian financial markets and investment climate and the Russian economy generally.

CAATSA also widens the differences between the scope and substance of U.S. and EU sanctions against Russia. The EU recently extended its own sectoral sanctions until 31 January 2020 but has not adopted new, broader sanctions like those in CAATSA.

During 2018, various members of the U.S. Congress introduced legislation, including a bill "To strengthen the North Atlantic Treaty Organisation, to combat international cybercrime, and to impose additional sanctions with respect to the Russian Federation, and for other purposes" (also known as DASKAA), that if enacted could have resulted in additional sanctions in respect of Russia, including sanctions relating to Russian sovereign debt, Russian energy companies and Russian financial institutions. Similarly, another bill introduced during 2018 titled "Defending Elections from Threats by Establishing Redlines Act of 2018" (the "DETER Act"), if enacted, could have resulted in additional sanctions in respect of Russia, including sanctions relating to Russian sovereign debt, Russian energy companies and Russian financial institutions. These bills expired with the end of the 115th Congress.

On 13 February 2019, members of the U.S. Senate introduced a new version of DASKAA ("DASKAA 2019") in the Senate. DASKAA 2019, if enacted, would require the U.S. President to, among other things, impose sanctions prohibiting U.S. persons from dealing in new Russian sovereign debt issued on or after the 90th day after DASKAA 2019's enactment. In addition, DASKAA 2019 would require the U.S. President to impose certain sanctions on persons that the U.S. President determines to knowingly, on or after DASKAA 2019's enactment: (i) provide certain support to new crude oil development within Russia, (ii) make certain investments in Russian liquefied natural gas (LNG) export facilities outside of Russia, or (iii) invest in Russian state-owned energy projects outside of Russia. DASKAA 2019 would also authorise, among other things, the imposition of sanctions on Russian banks that support Russian efforts to undermine democratic processes or elections outside of Russia and on Russia's shipbuilding sector if Russia interferes in the freedom of navigation. It remains unclear whether or when DASKAA 2019 will become law.

On 8 April 2019, members of the U.S. Senate introduced a new version of the DETER Act (the "DETER Act 2019") in the Senate. The DETER Act 2019, if enacted, would require, if the U.S. Director of National Intelligence determines that the Russian government or a foreign person acting as an agent or on behalf of the Russian government interfered with a U.S. election (such determination to be made on or before the 60th day following a U.S. election), that the U.S. President within 30 days of such a determination impose various sanctions, including sanctions prohibiting U.S. persons from dealing in new Russian sovereign debt issued on or after the date of - 38-

the DETER Act 2019's enactment. In addition, if that determination is made, the DETER Act 2019 would require the U.S. President to, among other things: (i) impose additional sanctions on certain Russian state-owned financial institutions, (ii) prohibit new U.S. investment in Russia's energy sector or in Russian energy companies, (iii) impose certain sanctions on foreign persons making a new investment in Russia's energy sector or in Russian energy companies, (iv) impose certain sanctions on entities that the U.S. President determines to be part of, or operating for or on behalf of, the defence or intelligence sectors of the Russian government and entities 50% or more owned by such entities, and (v) impose certain sanctions on senior political figures in Russia or Russian oligarchs listed in an updated version of the Section 241 Report who directly or indirectly contributed to any Russian government interference in a U.S. election. It remains unclear whether or when the DETER Act 2019 will become law.

During 2019, members of the U.S. Congress have introduced other legislation that would, if enacted, impose additional sanctions with respect to Russia, including purportedly mandatory sanctions targeting (i) the Russian energy sector, specifically sanctions on persons providing pipe- laying vessels for Russian energy export pipelines and persons providing underwriting services or insurance or reinsurance for identified vessels, (ii) new investment, and the sale, lease, or provision of goods, services, technology, information or support, that directly and significantly contributes to the enhancement of the ability of the Russian government or its owned or controlled entities to construct energy export pipelines, which are currently targeted by non-mandatory sanctions, and (iii) foreign persons and foreign state agencies/instrumentalities determined to be a "critical cyber threat actor". If enacted, and depending on the sanctions imposed on any designated person under the enacted legislation, potential sanctions could include (among other things): (i) prohibiting any U.S. person from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person; (ii) limiting non-humanitarian development and/or security assistance from the US to the foreign state; (iii) opposing loans from international financial institutions that would benefit the sanctioned entity; (iv) prohibiting U.S. Export-Import Bank assistance for exports to the sanctioned person; (v) prohibiting banking transactions through the U.S. financial system in which the sanctioned person has an interest; (vi) prohibiting U.S. federal procurement from the sanctioned person; and/or (vii) denying export licences to export items to the sanctioned person. Further legislation has also been introduced that, if enacted, would prohibit U.S. persons from any dealings in Russian sovereign debt issued on or after 180 days from enactment. However, these sanctions would be immediately lifted if the Director of National Intelligence affirmatively determines and reports to the U.S. Congress that neither the Russian government nor a foreign person acting as an agent of or on behalf of the Russian interfered with a U.S. election (such determination to be made on or before the 30th day following a U.S. election) and the U.S. Congress certifies the Director of National Intelligence's determination. It remains unclear whether or when any of the additional sanctions legislation introduced will become law.

On 6 August 2018, the U.S. State Department issued a determination that the Russian government had violated the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the "CBW Act"). This determination triggered the imposition of a first round of sanctions against Russia and created the possibility of an additional second round of sanctions. The first tranche of sanctions took effect on 27 August 2018 and targets U.S. exports to Russia of certain items that could have military uses or dual-use technologies. On 2 August 2019, pursuant to the CBW Act, the United States decided to impose a second round of sanctions that will include the following: (i) the United States will oppose the extension of any loan or financial or technical assistance to Russia by international financial institutions (such as, for example, the World Bank or International Monetary Fund); (ii) U.S. banks will be prohibited from participating in the primary market for non-rouble denominated bonds issued by the Russian Federation and lending non- rouble denominated funds to the Russian sovereign (defined not to include state-owned entities); and (iii) licence applications for exports to Russia of dual-use chemical and biological items

- 39-

controlled by the U.S. Department of Commerce for weapons proliferation reasons will be subject to a "presumption of denial" policy.

While the Group and most of its shareholders are not on the SDN List, Mr. Gennady Timchenko, a member of the Board of Directors and beneficial owner of 17.0% of the shares in SIBUR, and Mr. Kirill Shamalov, a member of the Board of Directors and the management board of the Company (the "Company's Management Board") and beneficial owner of 3.8815% of SIBUR, are on the SDN List. In addition, the Group has joint ventures, namely Yuzhno-Priobsky GPP LLC, NPP Neftekhimia LLC and Sibgazpolimer JSC (which owns 100% of stake in Poliom), that are subject to certain US "sectoral" sanctions by virtue of being 50% indirectly owned by PJSC Gazprom Neft, an entity which is named on the Sectoral Sanctions Identifications List (the "SSI List") maintained by the OFAC and as a result certain of their operations and their ability to attract financing may be adversely affected. However, these joint ventures are not part of the Group and are not consolidated into the Group's financial statements.

No individual or entity within the Group has been designated by either the U.S. or the EU as a specific target of their respective sanctions imposed in connection with the Ukrainian crisis or otherwise. However, no assurance can be given that any of those persons or entities will not be so designated in the future, or that broader sanctions against Russia, which affect the Group, may not be imposed. Although no entity within the Group is a U.S. person, some Group entities are EU persons and are therefore required to comply with the EU sanctions, including not making funds or economic resources available to or for the benefit of persons designated by the EU as sanction targets. In the ordinary course of its business, the Group, like many other major Russian companies, has routine commercial operations with Russian persons and entities that are currently either under "sectoral" sanctions (such as PJSC NOVATEK ("NOVATEK"), Gazprom Neft, Rosneft, Sberbank, VTB, VEB.RF ("Vnesheconombank") and Russian Direct Investment Fund ("RDIF")) or included in the SDN List (such as Bank Rossiya). Such operations are limited to the territory of the Russian Federation and are permissible pursuant to applicable Russian law. Although the Group's transactions and commercial relations with these entities are not legally prohibited by the sanctions, should the sanctions regime in respect of these entities be widened or should new and/or secondary sanctions be introduced in respect of the above and/or in respect of other major suppliers or counterparties of the Group, the Group's business could be adversely affected.

In October 2018, the Council of the EU adopted a new regime of restrictive measures to address the use and proliferation of chemical weapons. The EU may impose sanctions on persons and entities involved in the development and use of chemical weapons anywhere, regardless of their nationality and location. The restrictive measures target persons and entities who are directly responsible for the development and use of chemical weapons as well as those who provide financial, technical or material support, and those who assist, encourage or are associated with them. Sanctions consist of a travel ban to the EU and an asset freeze for persons, and an asset freeze for entities. In addition, EU persons and entities are forbidden from making funds available to those listed. To date, nine individuals and one entity have been designated in relation to these restrictive measures.

The sanctions imposed by the U.S. and the EU in connection with the Ukraine crisis and other events so far have had an adverse effect on the Russian economy, to which the Group is exposed significantly, prompting revisions to the credit ratings of the Russian Federation and a number of major Russian companies that are ultimately controlled by the Russian Federation, causing extensive capital outflows from Russia and impairing the ability of Russian issuers to access international capital markets. The governments of the U.S. and certain EU member states, as well as certain EU officials, have indicated that they may consider additional sanctions should tensions in Ukraine continue. Such additional sanctions may have an adverse effect on the Russian - 40-

economy, its credit ratings, and consequently the credit ratings of the Group and the trading price of the Notes.

Although the Group has no reason to believe that it may be specifically targeted by the U.S. or EU sanctions, if the Group becomes a blocked person pursuant to U.S. or EU sanctions, either as a result of the above or through the targeting of a broader segment of the Russian economy, such sanctions will likely have a material adverse impact on the Group's business. For example, the Group might become unable to deal with persons or entities bound by the relevant sanctions, including international financial institutions and rating agencies, transact in U.S. dollars, raise funds from international capital markets, acquire equipment from international suppliers or access the Group's assets held abroad. Moreover, investors in the Notes may be restricted in their ability to sell, transfer or otherwise deal in or receive interest payments with respect to the Notes because the investor is subject to the jurisdiction of an applicable sanctions regime, which could make such Notes partially or completely illiquid and have a material adverse effect on their market value. All of the above could have a material adverse impact on the Group's business, financial condition or results of operations.

Social risks and corruption could adversely affect the value of investments in Russia

Emerging markets such as Russia are prone to social risks and increased lawlessness, including significant criminal activity. High levels of official corruption reportedly exist in certain locations where the Group conducts its business, including the bribing of officials for the purpose of initiating investigations by government agencies. Press reports have also described instances in which government officials engaged in selective investigations and prosecutions to further the commercial interests of government officials or certain individuals. Additionally, published reports indicate that a significant number of Russian media regularly publish biased articles in return for payment. Corruption and other illegal activities could disrupt the Group's ability to conduct its business effectively and claims that the Group was involved in corruption or illegal activities could generate negative publicity, either of which could harm the Group's business and financial position.

In addition, rising unemployment, forced unpaid leave, wages in arrears, and weakening economies, especially in single industry cities, have in the past led to and could lead again to labour and social unrest, a mood of protest and a rise in nationalism against migrant workers. Also, in July-August 2019, tens of thousands of people have demonstrated in central Moscow in support of the opposition candidates that were barred from running for Moscow's legislature on the grounds that they failed to collect enough genuine signatures of support. Any labour and social unrest could disrupt normal business operations, which also could materially adversely affect the Group's business, financial conditions or results of operations.

If Russia were to return to heavy and sustained inflation, the Group's results could be adversely affected

During the period from 2012 to 2017, the consumer prices index in Russia measured by Rosstat was 6.5% in 2013, 11.4% in 2014, 12.9% in 2015, 5.4% in 2016, 2.5% in 2017, 4.3% in 2018 and 4.7% in the first half of 2019. Although currently inflation remains at a low level, a return to heavy and sustained inflation could lead to market instability, new financial crises, reductions in consumer purchasing power and the erosion of consumer confidence. Any of these events could lead to decreased demand for the Group's services and have a material adverse effect on the Group's business, results of operations or financial condition.

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The Russian banking system remains underdeveloped

Russia's banking and other financial systems are not well-developed or regulated. There are currently a limited number of creditworthy Russian banks, most of which are headquartered in Moscow. Although the CBR has the mandate and authority to suspend banking licences of insolvent banks, many insolvent banks still operate. Many Russian banks also do not meet international banking standards, and the transparency of the Russian banking sector still does not meet internationally accepted norms.

In the past three years, a number of Russian non-state banks experienced rapid expansion through acquisitions of smaller, often undercapitalised players, with funding provided by the state, which contributed to liquidity issues for some of them. For example, in the second half of 2017, Bank Otkritie Financial Corporation and BINbank, two major privately owned Russian banks, underwent a bailout by the CBR as part of the latter's efforts to alleviate their liquidity constraints and bolster their financial solvency. Further, on 15 December 2017, the CBR announced the adoption of similar measures with respect to Promsvyazbank (then Russia's ninth largest lender by assets). While the above has had no impact on the Group in the past, there can be no assurances that it may not have a material impact on the Group's business, financial condition or results of operation.

The serious deficiencies in the Russian banking sector, combined with the deterioration in the credit portfolios of Russian banks, may result in the banking sector being more susceptible to the current worldwide credit market downturn and economic slowdown. A prolonged or serious banking crisis or the bankruptcy of a number of large Russian banks could, should they occur in future, have a material adverse effect on the Group's business and its ability to complete banking transactions in Russia.

Further, the Group relies on debt financing from Russian banks. Accordingly, if a prolonged or serious banking crisis were to occur in Russia, its ability to access this source of financing may be limited, which, in turn, could have a material adverse effect on the Group's business, financial conditions or results of operations.

The condition of Russia's physical infrastructure could disrupt or impair the Group's normal business activity, and efforts by the Government to improve the country's infrastructure may result in increased costs for the Group

Russia's physical infrastructure largely dates back to the Soviet era and some of it has not been adequately funded or maintained in recent years. Trail and road networks, power distribution (low- voltage) facilities and building stock are particularly affected. The deterioration of Russian physical infrastructure harms the national economy, disrupts the transportation of goods and supplies, adds costs to doing business in the Russian Federation and can interrupt business operations. Further deterioration in Russia's physical infrastructure could have a material adverse effect on the Group's business, financial condition and results of operations.

The Russian economy is dependent on the global economic environment

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.

The global economic downturn which began in 2008 has had an extensive adverse impact on the Russian economy. While many economies have subsequently recovered from the economic crisis, growth in many markets remains slow, and many markets which previously had seen very high

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growth have exhibited slower growth in recent years. The slowdown has been attributed to slowing growth rates in emerging and developing economies, among other developments.

Any future financial instability caused by downturns in the global economic environment may lead to restrictions or prohibitions, in particular, in currency regulation and control regimes. Should restrictions or prohibitions on hard currency payments and operations be imposed in Russia and other countries where the Group operates, it could limit the Group's ability to invest in its capital improvement programmes, pursue attractive acquisition opportunities, purchase raw materials or sell its products internationally, and limit the Group's ability to repatriate earnings from securities of its subsidiaries located in the country where such restrictions or prohibitions apply.

The negative impacts from a global economic downturn on the Russian economy could have a material adverse effect on the Group's business, financial condition and results of operations.

There can be no assurance as to the completeness, reliability or accuracy of ofﬁcial data and statistics in this Prospectus

The official data published by the Russian federal, regional and local government agencies are substantially less complete and reliable than those of some of the more developed countries of North America and Europe. Official statistics may also be produced on different bases than those used in those countries. The Group relies on and refers to information from various third-party sources and its own internal estimates. The Group believes that these sources and estimates are reliable, but it has not independently verified them and, to the extent that such sources or estimates are based on official data released by Russian federal, regional and local government agencies, they may be subject to the same uncertainty as the official data on which they are based. Any discussion of matters relating to Russia in this Prospectus is, therefore, subject to uncertainty due to concerns about the completeness or reliability of available official and public information.

RISKS RELATED TO THE RUSSIAN LEGAL SYSTEM AND RUSSIAN LEGISLATION

The Russian legal system and Russian legislation is in a developmental stage and this may create an uncertain environment for investment and business activity

The Russian legal framework applicable to a market economy is still under development. Since 1991, Soviet law has been largely, but not entirely, replaced by a new legal regime established by the 1993 Constitution of the Russian Federation, the Civil Code, other federal laws and decrees, orders and regulations issued by the Russian President, the Government and state authorities. These are, in turn, complemented by regional and local rules and regulations. These legal norms, at times, overlap with or contradict one another, or have substantial gaps. The recent nature of much Russian legislation and the rapid evolution of the Russian legal system may cast doubt on the enforceability and underlying constitutionality of certain laws and result in ambiguities, inconsistencies and anomalies. Russia is a civil law jurisdiction, and, as a rule, judicial precedents have no binding effect on subsequent decisions. The powers of various state authorities are not always clearly delineated, which may lead to administrative and/or legal conflicts. The Group can give no assurance that the development or implementation or application of legislation or regulations will not adversely affect foreign investors or private investors generally.

Among the risks of the current Russian legal system are:

• conflicting local, regional and federal rules and regulations;

• the limited availability of judicial and administrative guidance on interpreting Russian legislation; - 43-

• substantial gaps in the regulatory structure due to the delay in or absence of implementing legislation;

• the relative lack of independence of the judiciary;

• limited court personnel, especially in lower courts, with the ability to interpret developing Russian legislation, particularly business and corporate law;

• a high degree of discretion on the part of state authorities, which could result in arbitrary actions, and potentially corruption;

• bankruptcy procedures that are not well-developed and potentially subject to abuse; and

• the difficulty in enforcing domestic and foreign court judgments, as well foreign arbitral awards in practice.

As a result of these factors, even the best efforts to comply with Russian law may not always result in full compliance. See "— Risks Relating to the Group's Business — The Group could fail to obtain or renew necessary licences or fail to comply with the terms of its licences". In addition, all of the above weaknesses could affect the Group's ability to enforce its rights under contracts and licences or to defend itself against claims by others and could affect the ability of investors to have their rights upheld in a Russian court.

Selective or arbitrary government action could materially adversely affect the Group's business

The Group operates in an uncertain regulatory environment. State authorities in Russia have a high degree of discretion and may at times exercise their discretion arbitrarily, without hearing or prior notice, or in a manner that could be unduly influenced by political or commercial considerations. Selective or arbitrary governmental actions have included unscheduled inspections by regulators, suspension or withdrawal of licences and permits, unexpected tax audits, criminal prosecutions and civil actions. In addition, state authorities have also tried, in certain circumstances, by regulation or government act, to interfere with the performance of, nullify or terminate contracts. Furthermore, federal and local authorities have used common defects in matters surrounding the documentation of business activities as pretexts for court claims and other demands to invalidate such activities or to void transactions, sometimes to further interests different from the formal substance of the claims. In addition, there is no assurance that new regulations that impose restrictions in relation to the use by end-customer industries of the products the Group manufactures will not be adopted by government authorities in furtherance of various political or commercial interests. The occurrence of such selective or arbitrary action against the Group could have a material adverse effect on the Group's business, financial condition and results of operations or on the value of the Notes.

Imposition of governmental regulation of APG prices could negatively affect the Group's financial results

The price for APG is currently not subject to government regulation in Russia. The Group is, therefore, able to independently negotiate the purchase price of APG with its suppliers without being subject to government regulation. Although the price of APG significantly depends on changes in the regulated natural gas prices, the Group is able to negotiate its price at levels that are generally economically viable for the Group. See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Natural Gas Prices". However, in the event the Russian Government introduces price regulation of APG by the FAS or another body, the - 44-

Group will be required to comply with regulated prices. If APG price regulation results in additional costs for the Group that it is unable to pass on to its customers, the Group's business, financial condition and results of operations could be materially adversely affected.

Increase in export duties on LPG and naphtha or adverse change in the Russian export and import regime regarding energy and petrochemical products of the Group may adversely affect the prices the Group charges for these products

LPG and naphtha (excluding pentane and isopentane) the Group exports (except for exports to Belarus and Kazakhstan that are members of the Eurasian Customs Union (EACU)) are subject to export duties, which are set monthly by the Ministry of Economic Development. The export duty on LPG is based on a formula established by the Russian Government that is tied to the international benchmark price of LPG. The export duty on naphtha is calculated as a percentage of export duties on crude oil (Urals). As Russia's domestic prices for raw NGL, LPG and naphtha are based on export netback prices, higher export duties reduce the domestic price the Group may charge for these products, which could adversely affect the Group's energy products sales. See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Export Duties on LPG and Naphtha". An increase in export duties would also negatively affect the Group's export sales of LPG and naphtha, and at the same time reduce its feedstock purchasing costs.

In addition, any adverse changes in the Russian export and import regime, including imposition of protective export duties on the Group's products or a decrease in import duties on energy or petrochemical products imported into Russia, may have an adverse effect on the prices of the Group's products, and consequently, on the Group's sales.

The difficulty of enforcing court decisions and the discretion of state authorities in enforcing claims could prevent the Group or investors in the Notes, from obtaining effective redress in court proceedings

The independence of the judicial system from economic and political influences in Russia is developing. The court system is reported to be understaffed. Under Russian legislation, judicial precedents generally have no binding effect on subsequent decisions and are not recognised as a source of law. However, in practice, courts usually consider prior judicial decisions, particularly those of high-level courts, in their decisions. Enforcement of court judgments can, in practice, be very difficult in Russia. Additionally, court claims are sometimes reported to be used in furtherance of political and commercial aims. All of these factors make judicial decisions in Russia difficult to predict and make effective redress uncertain in some instances.

These uncertainties also extend to property rights. During Russia's transformation from a centrally planned economy to a market economy, legislation was enacted to protect private property against expropriation and nationalisation. However, due to a relative lack of experience in enforcing this legislation and potential political changes, the Group may not be able to obtain proper redress in the courts and may not receive adequate compensation if, in the future, the Government decides to nationalise or expropriate some or all of the Group's assets. The expropriation or nationalisation of any of the Group's or its subsidiaries' assets without fair compensation may have a material adverse effect on the Group's business, financial condition and results of operations or on the value of the Notes.

Any incidents of the judiciary's corruption and occasional abuse of discretion could lead to unjustified and abusive court decisions. It is not uncommon for excessive injunctive remedies or damages to be sought by a claimant (which may be a small shareholder of a public company) and granted by courts in commercial disputes. - 45-

Russia is not a party to treaties for the mutual enforcement of court judgments with most Western countries. Consequently, if a judgment is obtained from a court in any such jurisdiction, it is highly unlikely to be given direct effect in Russian courts. However, Russia (as a successor to the Soviet Union) is a party to the New York Convention. A foreign arbitral award obtained in a state which is a party to the New York Convention should be recognised and enforced by a Russian court (subject to the qualifications provided for in the New York Convention and in compliance with Russian civil procedure and other procedures and requirements established by Russian legislation). The Arbitration Procedural Code of the Russian Federation is in conformity with the New York Convention and thus has not introduced any substantial changes relating to the grounds for refusing to recognise and enforce foreign arbitral awards and court judgments. Nonetheless, in practice, reliance upon international treaties may meet with resistance or a lack of understanding on the part of Russian courts or other officials, thereby introducing substantial delay, difficulty and uncertainty into the process of enforcing any foreign judgment or any foreign arbitral award in Russia. Such issues could prevent the Group or investors from obtaining effective redress in court proceedings in Russia. See "Limitation on Enforceability of Civil Liabilities".

Difficulty in ascertaining the validity and enforceability of title to land or other real property in Russia and its encumbrances may have a material adverse effect on the Group's business, financial condition and results of operations

The legal framework relating to the ownership and use of land and other real property in Russia is not yet sufficiently developed to support private ownership of land and other real property to the same extent as is common in countries with more developed market economies. Because of Russia's vast territory and difficulties of being in a transitional phase, the process of surveying and title registration may continue for many years. Thus, it is often difficult to ascertain the validity and enforceability of title to land or other real property in Russia and the extent to which it is encumbered. These uncertainties may have a material adverse effect on the Group's business, financial conditions or results of operations.

The law relating to Russian corporate governance and control is subject to inconsistent application and may be difficult to enforce

The Group's operating subsidiaries are organised and exist in Russia and hold their assets in Russia. Therefore, corporate actions by such companies, and the rights of the Company as their controlling shareholder, are subject to mandatory rules of Russian corporate law. Corporate governance standards in Russia are not as developed as corporate governance standards in Western European countries or the United States and generally provide less protection for investors. For example, corporate governance practices in Russia have suffered from a lack of transparency and information disclosure (both to the public and shareholders), a lack of independence of directors and insufficient regulatory oversight and protection of shareholder rights. In addition, as with other areas of Russian law, the Russian courts' interpretation of corporate law concepts is, at times, inconsistent and subject to inconsistent application. Consequently, the Group may be subject to an increased burden in seeking to comply with all reasonably possible interpretations of such requirements or may find itself in formal non-compliance with such requirements.

Lack of developed corporate and securities laws and regulations in Russia may limit the Group's ability to attract future investment

The regulation and supervision of the securities market, financial intermediaries and issuers are relatively less developed in Russia than in the United States and certain members of the EU. While some important areas are subject to virtually no oversight, the regulatory requirements imposed on Russian issuers in other areas result in delays in conducting securities offerings and in accessing the capital markets. It is often unclear whether or how regulations, decisions and letters issued by - 46-

the various regulatory authorities apply to the Group. As a result, the Group may be subject to fines or other enforcement measures despite its best efforts at compliance with the domestic securities laws and regulations.

Shareholder liability under Russian legislation could cause the Group to become liable for the obligations of its subsidiaries and associates

Russian legislation generally provides that shareholders in a Russian joint stock company or members in a Russian limited liability company are not liable for the obligations of the joint stock company or limited liability company and bear only the risk of loss of their investment. This may not be the case, however, when one person (the "effective parent") is capable of determining decisions made by another entity (the "effective subsidiary") on the basis of an agreement between the two or in accordance with the charter of the subsidiary. Under certain circumstances, the effective parent bears joint and several responsibility for transactions concluded by the effective subsidiary prior to its insolvency in carrying out such decisions. The Civil Code and Federal Law No. 127-FZ "On Insolvency (Bankruptcy)" of 26 October 2002 (as amended) provide for certain other circumstances where a parent company may be deemed secondarily liable for the debts of its insolvent subsidiary. Accordingly, the Group could be liable in some cases for the debts of its subsidiaries. This liability could have a material adverse effect on the Group's business, financial conditions or results of operations.

Shareholder rights provisions under Russian law may impose additional costs on the Group

Russian law provides that shareholders that vote against or abstain from voting on certain matters have the right to require the company to purchase their shares at market value. The decisions that trigger this right include:

• decisions with respect to a reorganisation;

• decisions on obtaining public company status and the listing or delisting of shares or securities convertible into shares;

• the approval by shareholders of a "major transaction", which, in general terms, is a transaction involving property worth more than 50% of the gross book value of the relevant company's assets calculated according to RAS, regardless of whether the transaction is actually consummated; and

• the amendment of the relevant company's charter in a manner that limits shareholder rights.

The obligation of certain of the Group's subsidiaries that are not wholly owned by the Group to purchase shares in these circumstances, (which in respect of joint stock companies is limited to 10% of the respective subsidiary's net assets calculated in accordance with RAS at the time the matter at issue is voted upon, but is not limited for limited liability companies), could have a material adverse effect on the Group's business, financial condition and results of operations.

Legislation to protect against nationalisation and expropriation may not be enforced in the event of a nationalisation or expropriation of the Group's assets

Although the Russian Government has enacted legislation to protect property against expropriation and nationalisation and to provide for fair compensation to be paid if such events were to occur, there can be no certainty that such protections will be enforced. This uncertainty is due to several factors, including the lack of state budgetary resources, the lack of an independent judicial system and sufﬁcient mechanisms to enforce judgments, and corruption among Russian state ofﬁcials. - 47-

The concept of property rights is not well-developed in Russia and there is not a great deal of experience in enforcing legislation enacted to protect private property against nationalisation and expropriation. As a result, the Group may not be able to obtain proper redress in the courts, and may not receive adequate compensation if, in the future, the Russian Government decides to nationalise or expropriate some or all of the Group's assets. While management considers that the Group's assets are not liable to be nationalised or expropriated, any expropriation or nationalisation of any of the Group's assets without fair compensation may have a material adverse effect on the Group's business, ﬁnancial condition and results of operations.

Russian bankruptcy law has been the object of limited court decisions and, thus, there can be no assurance as to how claims by the Lender or the Trustee on behalf of the Noteholders against SIBUR would be resolved in the event of SIBUR's bankruptcy

Russian bankruptcy laws often differ from comparable laws in the United States and Western European countries and may be subject to varying interpretations. There is little precedent to predict how claims on behalf of the Noteholders against SIBUR would be resolved in the case of SIBUR's bankruptcy. In addition, under Russian law, SIBUR's obligations under the relevant loan agreement would be subordinated in the event of its insolvency to the following obligations: claims related to the administration of insolvency proceedings, including salaries of personnel involved in insolvency proceedings, utility bills, legal expenses and other payments; first priority claims (including claims in tort for damages in respect of physical persons' life or health, claims under employment contracts and other social benefits and copyright claims); and claims secured by a pledge of the credit organisation's assets. Any residual claims of secured creditors that remain unsatisfied after the sale of such collateral rank pari passu with claims of unsecured creditors.

RISKS RELATING TO THE RUSSIAN TAXATION SYSTEM

The Russian taxation system is relatively underdeveloped

Almost all of the Group's assets and operations is located in Russia and, therefore, weaknesses in the Russian tax system could adversely affect the Group. The Russian companies of the Group are subject to a broad range of taxes and charges imposed at the federal, regional and local levels, including, but not limited to, corporate profits tax, value added tax ("VAT"), excise tax, property tax and payroll-related security contributions.

The Russian Government is continually reforming the tax system by redrafting parts of the Tax Code of the Russian Federation (the "Russian Tax Code"). Since 1 January 2009, the corporate profits tax rate has been 20%. For individuals who are tax residents in the Russian Federation, the current personal income tax rate applicable to most types of income is 13%. The current general rate of VAT is 20%.

Historically, the system of tax collection in Russia has been relatively ineffective, resulting in continual changes in the tax legislation, which sometimes occur on short notice and apply retrospectively. The interpretation and application of existing laws and regulations by various authorities is often unclear, unstable or non-existent. Although Russia's tax climate and the quality of Russian tax legislation have generally improved with the introduction of the Russian Tax Code, there can be no assurance that the Russian Tax Code will not be changed or interpreted in the future in a manner adverse to the stability and predictability of the Russian tax system.

Since Russian federal, regional and local tax laws and regulations have been subject to frequent changes and some of the sections of the Russian Tax Code relating to the aforementioned taxes are comparatively new, the interpretation and application of these laws and regulations is often unclear, unstable or non-existent. Differing interpretations of tax laws and regulations may exist - 48-

both among and within government bodies at federal, regional and local levels, increasing the amount of uncertainty and tax risks and leading to the inconsistent enforcement of these laws and regulations.

Furthermore, taxpayers, the Russian Ministry of Finance and the Russian tax authorities often interpret tax laws and regulations differently. In some instances, the Russian tax authorities have applied new interpretations of tax laws and regulations retroactively. Private clarifications to specific taxpayers' queries in respect of particular situations issued by the Russian Ministry of Finance are not binding on the Russian tax authorities. There can be no assurance, therefore, that the representatives of the local Russian tax authorities will not take positions contrary to those set out in the private clarification letters issued by the Russian Ministry of Finance. Moreover, there can be no assurance that the Russian legislation and regulations will not be altered, in whole or in part, or that the Russian tax authorities and/or Russian courts or other regulatory authorities will not interpret these rules and regulations in such a way that the arrangements described in this Prospectus may be subject to different tax treatment than the treatment described in this Prospectus, whether retroactively or otherwise, or would be adversely affected in some other way.

There is a possibility that the Russian Federation could impose arbitrary or onerous taxes and penalties in the future. For instance, legislatures of the Russian Federation regions are currently empowered to provide wide-ranging incentives such as reduced income tax rates for business units operating within a region's territory. However, the federal government of the Russian Federation has recently initiated legislative amendments aimed at reducing region-level authority to stipulate such preferential taxation. Thus, a reduction of the corporate profits tax rate at the regional level available solely for targeted types of taxpayers defined at the federal level. The present reduced regional profits tax rates will remain in effect until January 2023 (at the latest) and the Group could face an increased fiscal burden in the form of increased corporate profits taxes. These conditions complicate tax planning and related business decisions. The consequent uncertainties could also expose the Group to significant fines, penalties and potentially severe enforcement measures despite the Group's best efforts at compliance, and could result in a greater than expected tax burden. This, in turn, could have a material adverse effect on the Group's business, financial conditions or results of operations.

Generally, taxpayers are subject to tax audit for a period of three calendar years immediately preceding the year in which the decision to carry out a tax audit was taken. In certain circumstances, repeated tax audits (i.e. audits with respect to the same taxes and the same periods) are possible. Generally, the statute of limitations for the commission of a tax offence is three years after the date on which the tax offence was committed or from the date following the end of the tax period during which the tax offence was committed (depending on the nature of the tax offence). Nevertheless, according to the Russian Tax Code and based on current judicial interpretation, there may be cases where the statute of limitations for tax offences may extend beyond three years.

Tax returns, together with related documentation, are subject to review and investigation by a number of Russian authorities, which are empowered by Russian law to impose fines and penalties on taxpayers. Generally, tax returns, together with the related documentation, remain subject to inspection by the Russian tax authorities for a period of three calendar years immediately preceding the year in which the decision to conduct a tax audit is taken. The fact that a particular year has been reviewed by the Russian tax authorities does not prevent further review and investigation by the Russian tax authorities of any tax returns and other documentation relating to that year during the three-year limitation period. In particular, a repeated tax audit may be conducted (i) by a higher-level tax authority as a measure of control over the activities of lower- level tax authorities, (ii) in connection with the reorganisation/liquidation of a taxpayer, or (iii) as a result of the filing by such taxpayer of an amended tax return decreasing the tax payable to the - 49-

revenue. Therefore, previous tax audits may not preclude subsequent claims relating to the audited period.

Additionally, the Russian Tax Code provides for possible extension of the three-year statute of limitations for liabilities for tax offences if the taxpayer has actively obstructed the performance of the tax audit and such obstruction has become an insurmountable obstacle for the tax audit. As the terms "obstructed" and "insurmountable obstacles" are not specifically defined in Russian tax law or any other parts of Russian law, the Russian tax authorities may attempt to interpret these terms broadly, effectively linking any difficulty experienced by them in the course of their tax audit with obstruction by the taxpayer and use that as a basis to seek tax adjustments and penalties beyond the three-year limitation period. Therefore, the statute of limitations is not entirely effective with respect to liability for tax offences in Russia. An extended tax audit, if it is concluded that the Group had significant tax underpayments relating to previous tax periods, may have a material adverse effect on the Group's business, results of operations and financial condition, the Issuer's ability to service its payment obligations under the Notes or the trading price of the Notes. Tax audits may also impose additional administrative burden on the Group by diverting the attention of its management and financial personnel and requiring resources for defending the Group's tax- filing position, including for any tax litigation.

In its Decision No. 138-O of 25 July 2001, the Constitutional Court of the Russian Federation introduced the concept of "a taxpayer acting in bad faith" without clearly stipulating the criteria for its interpretation and application. Similarly, this concept is not defined in the Russian tax legislation or other branches of Russian legislation. Nevertheless, in practice, this concept has been used by the Russian tax authorities in order to deny, for instance, the taxpayer's right to rely on the letter of the tax law. Based on available practice, the Russian tax authorities and courts often exercise significant discretion in interpreting this concept in a manner that is at times unfavourable to taxpayers.

In October 2006, the Plenum of the Supreme Arbitrazh Court of the Russian Federation issued a resolution concerning judicial practice with respect to unjustified tax benefits. In this context, a "tax benefit" means a reduction in the amount of a tax liability resulting, in particular, from a reduction in the tax base, the receipt of a tax deduction or tax concession or the application of a lower tax rate, or the receipt of a right to a refund (offset) or reimbursement of tax. The resolution provides that where the true economic intent of business operations is inconsistent with the manner in which it has been taken into account for tax purposes, a tax benefit may be deemed to be unjustified. The same conclusion may apply when an operation lacks a reasonable economic or business rationale. As a result, a tax benefit cannot be regarded as a business objective in its own right. On the other hand, the fact that the same economic result might have been obtained with a lesser tax benefit accruing to the taxpayer does not constitute grounds for declaring a tax benefit to be unjustified. Moreover, there are no rules and little case law applicable to distinguishing between lawful tax optimisation and tax avoidance or evasion. The tax authorities have actively sought to apply the resolution of the Supreme Arbitrazh Court when challenging tax positions taken by taxpayers in court, and are expected to extend its application in the future. Although the intention of this resolution is to combat tax abuses, in practice there can be no assurance that the tax authorities will not seek to apply this concept in a broader sense than may have been intended by the Supreme Arbitrazh Court.

The above approach was further developed in amendments to the Russian Tax Code, which became effective on 19 August 2017. The amendments introduced the new Article 54.1 to the Russian Tax Code limiting activities aimed at reducing the amount of taxes payable. Under those provisions, a taxpayer may not reduce the tax base and/or the amount of tax payable by misrepresenting information on economic events or the objects of taxation which are required to be disclosed in a taxpayer's tax and/or accounting records or tax statements. A taxpayer has the - 50-

right to reduce the tax base and/or the amount of taxes payable, provided that the following conditions are met: (i) it is not the principal objective of a transaction to cause an amount of tax not to be paid or to be refunded; or (ii) the obligation arising from a transaction was performed by a person who is a party to the contract concluded with the taxpayer and/or a person to whom such obligation was transferred by contract or law. The following circumstances do not on their own constitute grounds for regarding a tax benefit as unjustified: (a) if primary documents were signed by unidentified or unauthorised persons; (b) if a taxpayer's counterparty violated the tax law; or (c) if the same economic result could have been obtained through other transactions.

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 could 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.

Recent developments show that the Russian tax authorities are scrutinising various tax planning and mitigation techniques used by taxpayers, including international tax planning. In particular, the Russian Tax Code contains the "controlled foreign companies" rules (the "Russian CFC Rules"), the concept of tax residency for legal entities and the beneficial ownership concept, which came into force on 1 January 2015.

Under the Russian CFC Rules, in certain circumstances, undistributed profits of foreign companies and non-corporate structures (e.g. trusts, funds or partnerships) domiciled in foreign jurisdictions, which are ultimately owned and/or controlled by Russian tax residents (legal entities or individuals), will be subject to taxation in Russia. The Russian CFC Rules are being further developed. Certain provisions of the Russian CFC Rules are still ambiguous and may be subject to arbitrary interpretation by the Russian tax authorities.

Under the concept of tax residency for legal entities, a foreign legal entity may be recognised as a Russian tax resident if such entity is in fact managed from Russia. When an entity is recognised as a Russian tax resident, it is obligated to register with the Russian tax authorities, calculate and pay Russian tax on its worldwide income and comply with other tax-related rules established for Russian entities. The new rules set principal and secondary criteria for determining the place of management (among other things, the place where the company's executive body operates). However, there is some uncertainty as to how these criteria will be applied by the Russian tax authorities in practice.

A beneficial ownership concept, which is, to some extent, in line with the concept developed by the Organisation for Economic Co-operation and Development (the "OECD"), has also been added to the Russian Tax Code. In particular, based on this concept the treaty relief should be available to foreign legal entities, provided they have the actual right to receive income (i.e. they qualify as a "beneficial owner of income"). The benefits of a double taxation treaty will not apply if a foreign person claiming such benefits has limited powers to dispose of the relevant income, fulfils intermediary functions without performing any other duties or taking any risks and paying such income (partially or in full) directly or indirectly to another person who would not be entitled to the same benefits had it received the income in question directly from Russia. Starting 1 January 2017, a non-resident income recipient is obliged to provide a tax agent with confirmation that it is the beneficial owner of the income. However, the Russian Tax Code provides for no clear guidelines as to the form and contents of such confirmation.

Introduction of the above new rules and concepts is likely to impose additional administrative burden on the Group. No assurance can currently be given as to how the above concepts will be applied in practice, their potential interpretation by the Russian tax authorities and the possible - 51-

impact (including additional tax liability, if any) on the Group. Therefore, 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, results of operations and financial condition, the Issuer's ability to service its payment obligations under the Notes or the trading price of the Notes.

Russia is increasingly engaged in the international exchange of tax and financial information (including through country-by-country reporting standards and common reporting standards developed and approved by the OECD). On 12 May 2016, the Russian Federation signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (thereby joining the Standard for Automatic Exchange of Financial Account Information (Common Reporting Standard)) which starting from 2018 enables the Russian tax authorities, provided the required conditions are met, to automatically obtain certain information for tax purposes from foreign countries, including certain offshore jurisdictions.

In 2017 the Russian Federation signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS ("MLI") implementing a series of tax treaty measures to update international tax rules and lessen the opportunity for tax avoidance. The MLI has been ratified by Russia on 1 May 2019 and will start applying to withholding taxes applied by Russia in accordance with specified double taxation treaties with other MLI-participating jurisdictions starting from 1 January 2020.

It is currently unclear how the Russian tax authorities will interpret and apply the new tax provisions and what the possible impact on the Group will be. Therefore, it cannot be excluded that the Group might be subject to additional tax liabilities if these changes are applied to transactions carried out by the Group. In particular, the MLI sets forth certain provisions with respect to tax treaty abuse and other matters. It is not yet clear how the Russian Federation will implement the MLI and what impact it may have with respect to taxation of payments under the Guarantee.

Furthermore, Russian tax legislation is continually 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 could affect the Group's overall tax efficiency and could result in significant additional taxes becoming payable. No assurance can be given that no additional tax exposures will arise for the Group.

With respect to petrochemical companies, the Russian Tax Code also provides some specific excise duties. These duties are stipulated per tonne of naphtha, paraxylene, ortoxylene, and benzol produced or purchased. Excise duty refunds are applicable in the case of further sales of these products. Furthermore, in the case of further processing of naphtha, paraxylene and benzol into petrochemical products, the Group is permitted to receive excise duty refunds with a scale-up factor. There is no assurance that significant changes in excise duty legislation, including the application of the scale-up factors, will not be adopted by the Russian Federation.

All the aforesaid 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 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 and financial condition.

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Russian transfer pricing rules may subject the Group's transfer prices to challenge by the Russian tax authorities

The Russian transfer pricing legislation allows the Russian tax authorities to make transfer pricing adjustments and impose additional tax liabilities with respect to "controlled" transactions. The list of "controlled" transactions under the transfer pricing legislation includes transactions performed with related parties and certain types of cross-border transactions with unrelated parties. Starting from 2019, transactions between related parties will no longer be "controlled" if both related parties are located in Russia and apply the same corporate profits tax rate (i.e. 20%); this is a positive development. This legislation also shifts the burden of proving market prices from the Russian tax authorities to the taxpayer. Although Russian transfer pricing rules were modelled on the basis of the transfer pricing principles developed by the OECD, there are some peculiarities as to how the OECD transfer pricing principles are reflected in the Russian rules. Special transfer pricing rules continue to apply to transactions in securities and derivatives.

Accordingly, due to uncertainties in the interpretation of Russian transfer pricing legislation and undeveloped court practice, no assurance can be given that the Russian tax authorities will not challenge the Group's prices and make adjustments which could adversely affect the Group's tax position. The Russian transfer pricing rules could have a material adverse effect on the Group's business, results of operations and financial condition.

Payments under the Guarantee made by SIBUR may be subject to Russian withholding tax or Russian personal income tax, as applicable

Payments following enforcement of the Guarantee to be made by SIBUR to the non-resident Noteholders relating to interest on the Notes are likely to be characterised as Russian-source income. Accordingly, there is a risk that such payments may be subject to withholding tax at a rate of 20% in the event that a payment under the Guarantee is made to a Russian non-resident Noteholder that is a legal entity or organisation which in each case holds the Notes otherwise than through a permanent establishment in the Russian Federation. In the event a payment under the Guarantee is made to a non-resident individual, there is a risk that such payment may be subject to personal income tax at a rate of 30%. If tax is not withheld at source by SIBUR which is a Russian legal entity, non-resident Noteholders that are individuals may be obliged to pay Russian personal income tax on their own on the basis of a personal income tax return. Such tax, if it arises, would not be in any way indemnified by the Issuer and/or the Guarantor.

There is a possibility that all or part of the proceeds from the issue of the Notes may be used by the Issuer to provide loans to one or several companies of the Group. Should this be the case, the Company expects the Eurobond Exemption (as defined in "Tax Considerations — The Russian Federation — Taxation of Payments under the Guarantee made by SIBUR — The Eurobond Exemption") to apply to its payments under the Guarantee exempting them from Russian withholding tax.

The Russian Tax Codes sets a number of conditions for application of the Eurobond Exemption (see "Tax Considerations — The Russian Federation — Taxation of Payments under the Guarantee made by SIBUR — The Eurobond Exemption"). The Group cannot offer assurance that all of the required conditions for application of the Eurobond Exemption would be met when the payments under the Guarantee are due or that interpretation of the Eurobond Exemption by the tax authorities would not differ from such interpretation by the Guarantor. In these cases the Eurobond Exemption may not be available and Russian withholding tax may apply to payments (in full or in part) under the Guarantee.

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The Group cannot offer any assurance that the above withholding tax would not be imposed on the full amount of the payment under the Guarantee, including with respect to the principal amount of the Notes. The imposition or possibility of imposition of this withholding tax could adversely affect the value of the Notes. See "Tax Considerations — The Russian Federation".

Under the gross-up provisions for the Notes, if payments made under the Guarantee are subject to any withholding taxes for any reason (as a result of which SIBUR would be obliged to reduce the payments to be made under the Guarantee by the amount of such taxes to be withheld), SIBUR is required to increase the payments as necessary so that the net amounts received in respect of such payments after such withholding or deduction will equal the respective amounts that would have been received in respect of such payments in the absence of such withholding or deduction. Recently, the Russian tax legislation has been amended to explicitly permit settlement of a taxpayer's obligations by other parties. Under the previous tax regime, the absence of such provision was perceived as being one of the key obstacles for the enforceability of gross-up provisions in Russia. Notwithstanding this recent change to the legislation, there is still is a risk that the tax gross-up for withholding tax will not take place and that the full amount of the payments made by SIBUR, will be reduced by Russian withholding income tax at a rate of 20% (or 30% in respect of individual Noteholders). See "Tax Considerations — The Russian Federation".

RISKS RELATED TO CHANGES IN TAX LAW APPLICABLE TO THE ISSUER

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 OECD Base Erosion and Profit Shifting project ("BEPS"). Investors should note that certain action points which form part of the OECD 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).

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. This 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.

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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.

RISKS RELATING TO THE ISSUER

The following risks are specific to the Issuer and that may affect the its ability to fulfil its obligations under the Notes.

The Issuer's ability to fulfil its obligations under the Notes is dependent on the Group

The Issuer is a direct wholly-owned subsidiary of the Guarantor and will use the net proceeds from the issuance of the Notes for the Group's general corporate purposes and refinancing of existing indebtedness. The Issuer has insufficient net assets, other than amounts due to it from other members of the Group in respect of any inter-Group loans, to meet its obligations to pay interest and other amounts payable in respect of the Notes. The Issuer would, therefore, in the absence of other funding sources, have to rely on other members of the Group providing sufficient funds to meet such obligations.

In addition, the other members of the Group are separate and distinct legal entities and have no obligation, other than the Guarantor in relation to the Guarantee, contingent or otherwise, to pay any amounts due pursuant to the Notes or to make any funds available for these purposes, whether by dividends, loans, distributions or other payments, and do not, apart from the Guarantor, guarantee the payment of interest on, or principal of, the Notes.

The Issuer is subject to risks related to the location of its centre of main interest, the appointment of examiners and the claims of preferred creditors under Irish Law

COMI

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) (the "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 three 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 - 55-

"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, the majority of its directors are tax resident in Ireland and is registered for tax in Ireland, 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.

Preferred Creditors

If the Issuer becomes subject to an insolvency proceeding and the Issuer has obligations to creditors that are treated under Irish law as creditors that are senior relative to the Noteholders, the Noteholders may suffer losses as a result of their subordinated status during such insolvency proceedings. In particular, under Irish law, the claims of unsecured creditors of the Issuer rank behind other creditors (including fees, costs and expenses of any examiner appointed, certain capital gains tax liabilities and claims of the Irish Revenue Commissioners for certain unpaid taxes).

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, its shareholders and 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.

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 (i) voted in favour of the proposals and (ii) 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 (iii) whose interests would be impaired by implementation of the scheme of arrangement and the proposals are not unfairly prejudicial to any interested party.

If an examiner were appointed while any amounts due by the Issuer under the Notes were unpaid, the primary risks to the holders of Notes would be as follows:

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

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(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;

(iii) the examiner may set aside any negative pledge in the Notes prohibiting the creation of security or the incurring of borrowings by the Issuer to enable the examiner to borrow to fund the Issuer during the protection period; and

(iv) while a company is under the protection of the Court, no action can be taken to enforce guarantees against persons who have guaranteed the debts of the company. Whether this prohibition under Irish law would be effective in the pursuit of a foreign guarantee is a matter of the governing law of the guarantee and/or the guarantor's residence.

RISKS RELATING TO THE NOTES AND THE TRADING MARKET

The protection afforded by the negative pledge contained in the Terms and Conditions of the Notes is limited, which may adversely affect the value of investments in the Notes

The Issuer and the Guarantor have agreed in Condition 4.1 of the Terms and Conditions not to, and to procure that no Material Subsidiary (as defined in the Terms and Conditions) will, directly or indirectly, create, incur, assume, permit or suffer to exist any Lien other than a Permitted Lien (in each case, as defined in the Terms and Conditions) on any of its properties or assets, whether owned at the Issue Date or thereafter acquired, or on any income, revenue or profits therefrom, to secure for the benefit of holders of any Relevant Indebtedness (as defined in the Terms and Conditions) any payment of any sum due in respect of, or any payment under any guarantee, indemnity or other like obligation relating to, any such Relevant Indebtedness without, at the same time or prior thereto, effectively providing, for so long as such Relevant Indebtedness is so secured, that the Issuer's obligations under the Notes or the Guarantor's obligations under the Guarantee, as the case may be, (a) are secured at least equally and rateably with such other Relevant Indebtedness or (b) benefit from such other security or other arrangements as either (i) the Trustee shall in its absolute discretion deem not materially less beneficial to the interests of the Noteholders or (ii) shall be approved by an Extraordinary Resolution (as defined in the Trust Deed).

The application of this negative pledge and the protection that it affords to holders of the Notes, however, is limited. For example, the definition of Relevant Indebtedness is limited to (a) Indebtedness (as defined in the Terms and Conditions) in the form of or represented by any bond, note, debenture stock, loan stock, certificate or other debt instrument (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, credit agreements or similar facilities) which is, or is capable of becoming, quoted, listed or ordinarily dealt in or traded on any stock exchange or any public or institutional securities market (including, without limitation, any over-the-counter market); or (b) Indebtedness in the form of a loan to the Issuer, the Guarantor or any Material Subsidiary of the Guarantor which is financed by the issuance of any of the foregoing forms of debt in (a) above, where such issuance is by a special purpose company or a bank and the rights to payment of the holders of such forms of debt are limited to payments actually made by either the Issuer, the Guarantor or such Material Subsidiary pursuant to such loan.

In addition, pursuant to an exemption from the negative pledge, the Group will be permitted to secure an aggregate amount of Relevant Indebtedness not exceeding 20% of the Group Total Assets (as defined in the Terms and Conditions), without any obligation to afford any equal and rateable security to holders of the Notes. As a result, the Group 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 - 57-

in respect of the Notes or the Guarantee, as the case may be, which may adversely affect the value of an investment in the Notes and/or cause holders of the Notes to rank in terms of priority behind such secured creditors.

Tax might be withheld on proceeds received from a source within Russia upon disposals of the Notes reducing their value

Generally, there should be no Russian withholding tax on gains from sale or other disposition of the Notes imposed on non-resident Noteholder that is a legal entity or organisation. 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 Notes (i.e. debt obligations) where proceeds from sale or other disposition of the Notes are received from a source within Russia by a non-resident Noteholder that is a legal entity or organisation, 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 Russian Ministry of Finance in its clarification letters opined that the amount of sale or other disposal proceeds attributable to the accrued interest on the Notes 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. The foreign Noteholder may be entitled to a reduction of such Russian withholding tax under an applicable double taxation treaty.

Where proceeds from the sale or other disposal of the Notes are deemed to be received from a source within Russia by a non-resident Noteholder, who is an individual, a Russian personal income tax rate of 30% will apply to the gross amount of sales or other disposal proceeds realised upon such sale or other disposal of the Notes less duly documented cost deductions (including the acquisition cost of the Notes and other documented expenses related to the acquisition, holding and the sale or other disposal of the Notes), provided that the documentation supporting cost deductions is available in a timely manner to the tax agent that is obliged to calculate and withhold Russian personal income tax. Although such tax may be reduced or eliminated based on provisions of an applicable double taxation treaty subject to timely compliance by that Noteholder with the treaty clearance formalities, in practice an individual non-resident Noteholder may not be able to obtain the advance treaty relief in relation to sales or disposal proceeds received from a source within Russia, while obtaining a refund of taxes withheld can be extremely difficult, if not impossible.

Further, even though the Russian Tax Code requires only a Russian professional asset manager or broker or another person (including an economically autonomous subdivision of a foreign company in Russia or an individual entrepreneur located in Russia) acting under an asset management agreement, a brokerage service agreement, an agency agreement, a commission agreement or a commercial mandate agreement to withhold the tax from payment to an individual associated with disposition of securities, there is no guarantee that other Russian companies or foreign companies operating in Russia or an individual entrepreneur located in Russia would not seek to withhold the tax. Moreover, in May 2019 the Russian Government proposed a draft bill that introduces obligations for all Russian companies or private entrepreneurs to act as tax agents and withhold income tax when making payments in lieu of sale of securities. The draft bill is currently under consideration by the Russian parliament.

The imposition or possibility of imposition of the withholding tax could adversely affect the value of the Notes. See "Tax Considerations — The Russian Federation". - 58-

Payments under the Notes may be subject to Russian withholding tax

Payments under the Notes may be subject to Russian withholding tax if the Issuer is treated as a Russian tax resident or if the Issuer's activities lead to creation of a permanent establishment for the Issuer in the Russian Federation. In these cases payments of interest under the Notes made by the Issuer to the non-resident Noteholders could be recognised by Russian tax authorities as subject to Russian withholding tax at a rate of 20% (or 30% in respect of individual non-resident Noteholders).

However, the Russian Tax Code provides an exemption from the obligation to withhold tax from interest paid by a Russian organisation to legal entity that are non-resident Noteholders under the "quoted bonds" issued in accordance with the legislation of a foreign jurisdiction (this exemption is also applicable to the foreign organisations, which are either recognised as Russian tax residents, or as those organisations, which activities lead to creation of a permanent establishment in the Russian Federation). Based on the professional advice received, the Issuer believes that the Notes should be recognised as "quoted bonds" for purposes of the Russian Tax Code. For details, see "Tax Considerations — The Russian Federation".

Based on the professional advice received, the Issuer believes that it should be released from the obligation to withhold the Russian withholding tax from interest payments made to non-resident Noteholders that are legal entities under the Notes, provided that the Notes continue to be recognised as "quoted bonds" for the purposes of the Russian Tax Code as outlined above.

If the Issuer is treated as a Russian tax resident, or the Issuer's activities lead to creation of a permanent establishment for the Issuer in the Russian Federation, the payments under the Notes (including interest and principal amounts under the Notes - in full (if the Issuer is treated as a Russian tax resident) or in the amount attributable to the Russian permanent establishment of the Issuer (if any)) made by the Issuer to individual non-resident Noteholders less any available cost deduction could be subject to Russian taxation at a rate of 30% subject to any available double taxation treaty relief (for details, see "Tax Considerations — The Russian Federation — Taxation of Payments under the Guarantee made by SIBUR — Double Taxation Treaty Relief").

Also, if the Issuer is treated as a Russian tax resident, or if the Issuer's activities lead to creation of a permanent establishment in the Russian Federation, the Issuer will be fully or in part attributable to the Russian permanent establishment of the Issuer subject to all applicable Russian taxes in accordance with the Russian tax law and will be exposed to all of the risks and implications associated with the Russian tax system. Such Russian tax consequences could have a material adverse effect on the Issuer's business, financial condition and results of operations and the Issuer's ability to make payments under, or the trading price, of the Notes.

The Group will have the ability to incur substantially more debt

The Group will be able to incur substantially more debt in the future. The limitations on incurrence of indebtedness in the Conditions permit the Issuer, the Guarantor and other members of the Group to borrow additional amounts as specified in the Terms and Conditions. In addition, debt permitted to be incurred by the Group's subsidiaries, other than the Issuer, may be structurally senior to the Notes and may be secured. If new debt, in particular secured or structurally senior debt, is added to the Group's current debt levels, the magnitude of the risks related to the Group's indebtedness described above could increase, and the foregoing factors could have an adverse effect on the Issuer's and the Guarantor's ability to pay amounts due in respect of the Notes.

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An investment in the Notes carries a high degree of risk and many factors could have a material adverse effect on the value of the Notes

An investment in the Notes is speculative and carries a high degree of risk. Potential investors must be prepared to bear the risk of a total loss of their investment. A material adverse effect on the value of the Notes could arise from many factors, such as a change in the liquidity in the market for the Notes, changes in securities analysts' financial estimates and projections, the operating and price performance of the Group's competitors and other comparable companies, announcements by the Group's competitors of significant acquisitions, joint ventures or capital commitments, regulatory actions that affect the Group's business, general conditions in the transportation industry and economic conditions in Russia. The market value of a Note may also vary considerably from its underlying net asset value, and could decline below the offer price per Note, which will be determined based on the results of the bookbuilding exercise conducted by the Joint Lead Managers.

The Group cannot assure the Noteholders that an active trading market will develop for the Notes

The Notes have not been registered under the Securities Act or any U.S. state securities laws and may not be offered or sold except in a transaction exempt from, or not subject to, the registration requirements of the Securities Act and applicable state securities laws. Although the Group has applied to Euronext Dublin for the Notes to be admitted to the Official List and to trading on the Regulated Market, it cannot assure the Noteholders that its application will be granted or an active trading market for the Notes will develop. The Group does not know the extent to which investor interest will lead to the development of an active trading market or how liquid that market might be, nor can it make any assurances regarding the ability of Noteholders to sell their Notes or the price at which the Notes might be sold. In the event an active trading market for the Notes fails to develop, the market price of the Notes could be adversely affected.

Credit ratings may not reflect all risks

The Notes are expected to be rated Baa3 by Moody's and BBB- by Fitch. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.

Changes to the credit ratings of the Group or the Notes may adversely affect the value of the Notes

The Company expects the Notes to be publicly rated by Moody's and Fitch after the date of settlement. Based upon other recognised international rating agencies' indicative ratings being lower than that of Moody's and Fitch, and other ratings feedback received from them, the Company decided not to procure a public rating from these other agencies. The Notes are expected to be rated Baa3 by Moody's and BBB- by Fitch. The foregoing credit rating does not mean that the Notes are a suitable investment. 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. The ratings do not address the likelihood that the principal on the Notes will be prepaid, paid on an expected final payment date or paid on any 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. The significance of each rating should be analysed independently from any other rating. There can be no assurance that the Group or the Notes will maintain their current ratings.

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Any changes in the credit ratings of the Group or the Notes could adversely affect the value of the Notes and the price that a subsequent purchaser will be willing to pay for the Notes.

Notes may not be a suitable investment for all investors

Each potential investor in any Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

(i) have sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes, the merits and risks of investing in the relevant Notes and the information contained or incorporated by reference in this Prospectus (such as the Issuer's financial statements, see "Presentation of Financial and Other Information — Financial Statements of the Issuer") or any applicable supplement;

(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Notes and the impact such investment will have on its overall investment portfolio;

(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Notes, including where principal or interest is payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor's currency;

(iv) understand thoroughly the terms of the relevant Notes and be familiar with the behaviour of any relevant indices and financial markets; and

(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

Certain provisions in the Terms and Conditions of the Notes relating to modification, waiver and substitution create additional risks for Noteholders

The Terms and Conditions contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally and to obtain Written Resolutions on matters relating to the Notes from Noteholders without calling a meeting. A Written Resolution signed by or on behalf of the holders of not less than 90% in principal amount of the Notes who for the time being are entitled to receive notice of a meeting in accordance with the provisions of the Trust Deed and whose Notes are outstanding shall, for all purposes, take effect as an Extraordinary Resolution.

In certain circumstances, where the Notes are held in global form in the clearing systems, the Issuer, the Guarantor and the Trustee (as the case may be) will be entitled to rely upon:

(i) where the terms of the proposed resolution have been notified through the relevant clearing system(s), approval of a resolution proposed by the Issuer, the Guarantor or the Trustee (as the case may be) given by way of electronic consents communicated through the electronic communications systems of the relevant clearing systems in accordance with their operating rules and procedures by or on behalf of the holders of not less than 90% in nominal amount of the Notes for the time being outstanding; and

(ii) where electronic consent is not being sought, consent or instructions given in writing directly to the Issuer, the Guarantor and/or the Trustee (as the case may be) by accountholders in the clearing systems with entitlements to such global note or certificate or, where the accountholders hold such entitlement on behalf of another person, on written - 61-

consent from or written instruction by the person for whom such entitlement is ultimately beneficially held (directly or via one or more intermediaries).

A Written Resolution or an electronic consent as described above may be effected in connection with any matter affecting the interests of Noteholders, including the modification of the Terms and Conditions, that would otherwise be required to be passed at a meeting of Noteholders satisfying the special quorum in accordance with the provisions of the Trust Deed, and shall for all purposes take effect as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held. These provisions permit defined majorities to bind all Noteholders, including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.

The Terms and Conditions also provide that the Trustee may, without the consent of Noteholders, agree to (i) certain modifications of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of Notes, the Agency Agreement, the Deed of Guarantee or the Trust Deed or (ii) determine without the consent of the Noteholders that any Event of Default or potential Event of Default shall not be treated as such or (iii) the substitution of another company as principal debtor under any Notes in place of the Issuer in each case subject to, and in the circumstances described in, Condition 12 of the Terms and Conditions.

The Notes may be redeemed prior to maturity

The Terms and Conditions provide that the Notes are redeemable at the Issuer's option in certain circumstances as defined in Condition 6.2, Condition 6.3 and Condition 6.4 of the Terms and Conditions, and, accordingly, the Issuer may choose to redeem the outstanding Notes at times when prevailing interest rates may be relatively low. In such circumstances, an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the Notes. Even if the Issuer does not exercise its option to redeem the Notes, its ability to do so may adversely affect the value of the Notes.

The Notes may only be transferred in accordance with the procedures of the depositaries in which the Notes are deposited

Except in limited circumstances, the Notes will be issued only in global form with interests therein held through the facilities of Euroclear, Clearstream, Luxembourg and DTC. Ownership of beneficial interests in the Notes will be shown on, and the transfer of that ownership will be effected only through, records maintained by Euroclear, Clearstream, Luxembourg and DTC or their nominees and the records of their participants. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. These laws may impair the ability to transfer beneficial interests in the Notes. Because Euroclear, Clearstream, Luxembourg and DTC can only act on behalf of their participants, which in turn act on behalf of owners of beneficial interests held through such participants and certain banks, the ability of a person having a beneficial interest in a Note to pledge or transfer such interest to persons or entities that do not participate in the Euroclear, Clearstream, Luxembourg or DTC systems may be impaired.

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USE OF PROCEEDS

The Group will use the aggregate net proceeds from the issuance of the Notes for general corporate purposes and refinancing of existing indebtedness.

Neither the Issuer nor the Company will directly or indirectly use the proceeds of the offering of the Notes, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person (i) to fund or facilitate any activities of or business with any person that, at the time of such funding or facilitation, is the subject of any sanctions administered or enforced by the respective governmental institutions and agencies of the U.S., the UK, the EU, a member state of the EU or Switzerland, including, without limitation, OFAC, the U.S. State Department, the U.S. Department of Commerce and Her Majesty's Treasury or any other equivalent governmental or regulatory authority, institution or agency which administers economic, financial or trade sanctions in the United Nations, the U.S., the UK, the EU, a member state of the EU or Switzerland (collectively, "Sanctions"), (ii) to fund or facilitate any activities of or business in any country or territory which is the subject or target of country-wide or territory- wide Sanctions, including, without limitation, Cuba, Iran, North Korea, Sudan, South Sudan, Crimea, Sevastopol and Syria, in each case with respect to (i) and (ii) above, if such funding, facilitation or business would result in violation of Sanctions if it were carried out by an EU or U.S. person, or (iii) to fund or facilitate any activity specified or referenced in CAATSA, Ukraine Freedom Support Act of 2014 (22 U.S.C. 8921 et seq.) (the "UFSA"), and Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 (22 U.S.C. 8901 et seq.) (the "Ukraine Act"), as a basis for the imposition of sanctions or penalties on any person pursuant to the UFSA and/or CAATSA and/or Ukraine Act as a result of such person engaging in such activity.

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CAPITALISATION

The following table sets forth the Group's capitalisation on a historical basis as of 30 June 2019. This table should be read in conjunction with "Selected Financial and Other Information" and the Interim Financial Statements included elsewhere in this Prospectus.

As of 30 June 2019 (RUB millions) Debt Short-term debt and current portion of long-term debt excluding related to ZapSibNeftekhim...... 20,103 Short-term lease liabilities ...... 5,190 Current portion of long-term ZapSibNeftekhim-related debt ...... 12,907 Long-term debt excluding related to ZapSibNeftekhim ...... 78,143 Long-term ZapSibNeftekhim-related debt ...... 238,950 Long-term lease liabilities ...... 12,299 Total debt ...... 367,592 Equity Total equity attributable to the shareholders of the parent company ...... 585,588 Non-controlling interest ...... 8,279 Total equity ...... 593,867 Total capitalisation(1) ...... 961,459 ______Note: (1) Calculated as the sum of total debt and total equity.

In July 2019, SIBUR redeemed its three-year bonds with the nominal amount of RUB 10 billion.

In July 2019, SIBUR repaid its USD 100 million loan from Alfa Bank and USD 60 million loan from Raiffeisen Bank and attracted new loans from these banks as part of refinancing of its short- term indebtedness, in particular USD 245 million loan from Alfa Bank and USD 75 million from Raiffeisen Bank.

In July 2019, the Group continued disbursement of ZapSibNeftekhim related debt: SIBUR attracted EUR 49.4 million from consortium of European banks led by Deutsche Bank and ZapSibNeftekhim attracted USD 40 million from New Development Bank.

Other than as described above, there have been no material changes to the capitalisation of the Group since 30 June 2019.

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SELECTED FINANCIAL AND OTHER INFORMATION

The following summary financial information presents selected historical financial information as of and for the six months ended 30 June 2019 and for the years ended 31 December 2018, 2017 and 2016. The selected statement of profit or loss, selected statement of comprehensive income data, selected statement of financial position data and selected statement of cash flows data as of and for the years ended 31 December 2018, 2017 and 2016 set forth below have been extracted without material adjustment, except as noted otherwise, from, and should be read in conjunction with, the Annual Financial Statements, which are included elsewhere in this Prospectus. The selected statement of profit or loss, selected statement of comprehensive income data, selected statement of financial position data and selected statement of cash flows data as of and for the six months ended 30 June 2019 and 2018 have been extracted without material adjustment from, and should be read in conjunction with, the Interim Financial Statements, which are included elsewhere in this Prospectus. Investors should not rely on interim results as being indicative results the Group may expect for the full year.

Prospective investors should read the following summary financial information in conjunction with the information contained in "Presentation of Financial and Other Information", "Risk Factors", "Operating and Financial Review", "Business" and the financial information appearing elsewhere in this Prospectus.

Selected Statement of Profit or Loss and Comprehensive Income Data

Six months ended Year ended 30 June 31 December 2019(1) 2018 2018 2017 2016 (RUB millions) Revenue ...... 266,279 257,694 568,647 454,619 411,812 Operating expenses ...... (199,548) (186,084) (403,566) (329,598) (308,681) Operating profit ...... 66,731 71,610 165,081 125,021 103,131 Finance income ...... 28,885 886 2,331 14,957 53,196 Finance expenses ...... (2,536) (14,636) (31,690) (10,974) (21,912) Result of subsidiary's disposal and remeasurement of related assets ...... — — (425) 19,805 — Result of subsidiary's acquisition and remeasurement of related liabilities ...... — — (217) (965) 1,666 Share of net income of joint ventures and associates ...... 3,723 1,462 3,173 2,073 6,471 Profit before income tax ...... 96,803 59,322 138,253 149,917 142,552 Income tax expense ...... (19,195) (13,454) (27,493) (29,671) (29,463) Profit for the reporting period ...... 77,608 45,868 110,760 120,246 113,089 Profit attributable to: Non-controlling interest 1,407 1,799 4,431 3,337 1,950 Shareholders of the parent company ...... 76,201 44,069 106,329 116,909 111,139 Other comprehensive income/(loss) after tax: Actuarial gain/(loss) on post-employment benefit obligations ...... — — 249 (157) 153 Deferred tax effect ...... — — (53) 40 (48) Other comprehensive income/(loss) for the reporting period ...... — — 196 (117) 105 Total comprehensive income for the reporting period ...... 77,608 45,868 110,956 120,129 113,194 ______Note: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

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Selected Statement of Financial Position Data

As of As of 30 June 31 December 2019(1) 2018 2017 2016 (RUB millions) ASSETS Non-current assets Property, plant and equipment ...... 828,329 769,309 605,315 435,002 Advances and prepayments for capital construction ...... 24,885 33,988 69,015 95,998 Right-of-use assets ...... 18,660 — — — Goodwill ...... 12,097 12,097 12,097 12,097 Intangible assets excluding goodwill ...... 100,666 103,454 107,822 114,228 Investments in joint ventures and associates ...... 38,871 35,853 33,673 31,757 Deferred income tax assets ...... 9,386 8,465 11,731 11,081 Long-term advances issued under project management and construction services ...... 50,500 53,509 52,027 33,109 Trade and other receivables ...... 9,875 6,576 2,408 1,754 Other non-current assets ...... 4,446 7,266 6,656 5,582 Total non-current assets ...... 1,097,715 1,030,517 900,744 740,608

Current assets Inventories ...... 44,556 40,467 31,734 30,992 Prepaid current income tax ...... 1,569 1,190 2,334 5,523 Trade and other receivables ...... 57,318 45,209 25,751 21,106 Prepayments and other current assets ...... 27,318 26,620 24,085 16,381 Short-term advances issued under project management and construction services ...... 94,842 86,164 39,699 4,630 Prepaid borrowing costs ...... 3,479 4,091 4,455 3,709 Cash and cash equivalents ...... 18,925 14,783 48,456 60,635 Total current assets...... 248,007 218,524 176,514 142,976 Assets classified as held for sale ...... 9,973 9,605 6,568 2,641 TOTAL ASSETS ...... 1,355,695 1,258,646 1,083,826 886,225

LIABILITIES AND EQUITY Non-current liabilities Long-term debt excluding related to ZapSibNeftekhim ...... 78,143 73,337 111,786 160,855 Long-term ZapSibNeftekhim-related debt ...... 238,950 236,940 170,712 158,770 Long-term lease liabilities ...... 12,299 — — — Deferred income from grants and subsidies ...... 59,691 55,335 48,720 41,082 Long-term advances received under project management and construction services ...... 63,323 66,268 58,524 35,481 Deferred income tax liabilities ...... 36,536 34,261 38,730 34,355 Other non-current liabilities ...... 18,683 15,885 16,575 12,390 Total non-current liabilities ...... 507,625 482,026 445,047 442,933

Current liabilities Trade and other payables ...... 117,659 119,888 95,360 50,007 Short-term advances received under project management and construction services ...... 85,044 76,891 39,558 5,931 Income tax payable ...... 2,493 4,640 1,611 2,213 Short-term debt and current portion of long-term debt excluding related to ZapSibNeftekhim ...... 20,103 13,300 27,361 21,273 Current portion of long-term ZapSibNeftekhim-related debt ...... 12,907 8,834 2,485 915 Short-term lease liabilities ...... 5,190 — — — Taxes other than income tax payable ...... 9,050 10,924 8,550 5,615 Total current liabilities ...... 252,446 234,477 174,925 85,954 Liabilities associated with assets classified as held for sale ...... 1,757 1,679 6,696 600 Total liabilities...... 761,828 718,182 626,668 529,487

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As of As of 30 June 31 December 2019(1) 2018 2017 2016 (RUB millions) Equity Ordinary share capital ...... 21,784 21,784 21,784 21,784 Share premium ...... 9,357 9,357 9,357 9,357 Equity-settled share-based payment plans ...... 32,450 32,450 32,450 32,450 Retained earnings ...... 521,997 468,879 388,515 290,889 Total equity attributable to the shareholders of the parent company ...... 585,588 532,470 452,106 354,480 Non-controlling interest ...... 8,279 7,994 5,052 2,258 Total equity ...... 593,867 540,464 457,158 356,738 TOTAL LIABILITIES AND EQUITY ...... 1,355,695 1,258,646 1,083,826 886,225 ______Note: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

Selected Statement of Cash Flows Data

Six months ended Year ended 30 June 31 December 2019(1) 2018 2018 2017 2016(2) (RUB millions) Net cash from operating activities ...... 55,207 70,645 160,409 152,677 137,694 Net cash used in investing activities ...... (60,951) (68,633) (133,286) (106,035) (142,243) Net cash from/(used in) financing activities ...... 10,551 (28,354) (63,857) (57,774) (104,718) Net increase/(decrease) in cash and cash equivalents ...... 4,142 (24,674) (33,673) (12,179) (111,448) Cash and cash equivalents at the end of the reporting period ...... 18,925 23,782 14,783 48,456 60,635 ______Notes: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16". (2) In 2018 the Group adopted new accounting policy for classification of proceeds from grants received for the purchase of property, plant and equipment in consolidated cash flow statement. Proceeds from grants for the year ended 31 December 2016 were reclassified in the Prospectus to conform the presentation of the Interim Financial Statements and the Annual 2018 Financial Statements.

Non-IFRS Financial Measures

As at and for the six As at and for the year ended months ended 30 June 31 December 2019(1) 2018 2018 2017 2016 (RUB millions, except as stated) EBITDA(2) ...... 86,116 89,188 201,007 160,851 139,629 EBITDA Margin(3) ...... 32.3% 34.6% 35.3% 35.4% 33.9% Adjusted EBITDA(4) ...... 92,246 91,548 205,529 164,964 146,221 Net Debt(5) ...... 348,667 301,749 317,628 263,888 281,178 Net Debt/EBITDA(6) ...... 1.76x 1.73x 1.58x 1.64x 2.01x Net Debt/Adjusted EBITDA(7) ...... 1.69x 1.70x 1.55x 1.60x 1.92x EBITDA/Interest(8) ...... 10.03x 12.62x 13.68x 10.12x 5.98x ______Notes: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16". (2) "EBITDA" means, for any period, profit or loss for the period, adjusted by income tax expense, finance income and expenses, depreciation and amortisation, share of net income of joint ventures and associates, impairment and reversal of - 67-

impairment of property, plant and equipment and write off of advances for capital construction, impairment of assets held for sale, result of subsidiary's disposal and remeasurement of related assets and result of subsidiary's acquisition and remeasurement of related liabilities. (3) "EBITDA Margin" means, for any period, EBITDA divided by the Group's external revenue. (4) "Adjusted EBITDA" means, for any period, EBITDA (as defined above) adjusted for the respective portion of EBITDA of joint ventures and associates and net of non-controlling interest share of related subsidiaries' EBITDA. In 2018, the Group's management changed its methodology for calculation of Adjusted EBITDA by adding adjustment for non- controlling interest share of related subsidiaries' EBITDA. The Adjusted EBITDA for the years ended 31 December 2017 and 2016 and for the six months ended 30 June 2018 in this Prospectus has been recalculated to conform to the current methodology. (5) "Net Debt" means total debt (the sum of long-term debt, short-term debt and current portion of long-term debt, long-term lease liabilities, short-term lease liabilities) less total cash and cash equivalents as of the end of the relevant period. (6) "Net Debt/EBITDA" means, as of 31 December 2018, 2017 and 2016, Net Debt divided by EBITDA for the years then ended. As of 30 June 2019 and 2018, Net Debt to EBITDA means Net Debt divided by EBITDA for the 12 months ended 30 June 2019 and 2018, respectively, which is calculated as the sum of EBITDA for each of the two most recent consecutive semi-annual periods. (7) "Net Debt/Adjusted EBITDA" means, as of 31 December 2018, 2017 and 2016, Net Debt divided by Adjusted EBITDA for the years then ended. As of 30 June 2019 and 2018, Net Debt to Adjusted EBITDA means Net Debt divided by Adjusted EBITDA for the 12 months ended 30 June 2019 and 2018, respectively, which is calculated as the sum of Adjusted EBITDA for each of the two most recent consecutive semi-annual periods; (8) "EBITDA/Interest" means, for any period, EBITDA divided by interest expense and capitalised interest reported in the period.

A reconciliation of EBITDA and Adjusted EBITDA to profit for the periods indicated is as follows:

Six months ended Year ended 30 June 31 December 2019(1) 2018 2018 2017 2016 (RUB millions) Adjusted EBITDA(2) ...... 92,246 91,548 205,529 164,964 146,221 Portion of EBITDA of joint ventures and associates ...... (7,528) (4,575) (9,978) (7,897) (9,528) Non-controlling interest share of related subsidiaries' EBITDA .... 1,398 2,215 5,456 3,784 2,936 EBITDA ...... 86,116 89,188 201,007 160,851 139,629 Net finance income/(expenses) ...... 26,349 (13,750) (29,359) 3,983 31,284 Result of subsidiary's disposal and remeasurement of related assets ...... — — (425) 19,805 — Result of subsidiary's acquisition and remeasurement of related liabilities ...... — — (217) (965) 1,666 Share of net income of joint ventures and associates ...... 3,723 1,462 3,173 2,073 6,471 Depreciation and amortisation ...... (19,273) (17,595) (35,510) (35,486) (34,996) (Impairment)/reversal of impairment of property, plant and equipment and write-off of advances for capital construction ...... (112) 17 (416) (164) (1,502) Impairment of assets held for sale ...... — — — (180) — Income tax expense ...... (19,195) (13,454) (27,493) (29,671) (29,463) Profit for the reporting period ...... 77,608 45,868 110,760 120,246 113,089 ______Note: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16". (2) In 2018, the Group's management changed its methodology for calculation of Adjusted EBITDA by adding adjustment for non-controlling interest share of related subsidiaries' EBITDA. The Adjusted EBITDA for the years ended 31 December 2017 and 2016 and for the six months ended 30 June 2018 in this Prospectus has been recalculated to conform to the current methodology.

A reconciliation of Net Debt to the Group's total debt is as follows as of the dates indicated:

As of As of 30 June 31 December 2019(1) 2018 2018 2017 2016 (RUB millions) Long-term debt excluding related to ZapSibNeftekhim ...... 78,143 122,584 73,337 111,786 160,855 - 68-

As of As of 30 June 31 December 2019(1) 2018 2018 2017 2016 (RUB millions) Long-term ZapSibNeftekhim-related debt ...... 238,950 195,324 236,940 170,712 158,770 Long-term lease liabilities ...... 12,299 — — — — Short-term debt and current portion of long- term debt excluding related to ZapSibNeftekhim ...... 20,103 1,647 13,300 27,361 21,273 Short-term lease liabilities ...... 5,190 — — — — Current portion of long-term ZapSibNeftekhim- related debt ...... 12,907 5,976 8,834 2,485 915 Total debt ...... 367,592 325,531 332,411 312,344 341,813 Cash and cash equivalents ...... 18,925 23,782 14,783 48,456 60,635 Net Debt ...... 348,667 301,749 317,628 263,888 281,178 ______Note: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

Operational Measures

The following table presents the Group's key operational measures for the periods indicated.

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (thousand tonnes, except as stated) Processing and production volumes(1) APG processing, million cubic metres(2) ..... 10,987 22,283 22,280 21,927 NGLs purchasing ...... 1,969 3,490 3,013 3,413 Raw NGL fractionation(3) ...... 3,716 7,712 7,522 7,246

External sales volumes Olefins and Polyolefins ...... 610 1,240 1,178 1,092 Plastics, Elastomers and Intermediates ...... 1,154 2,446 2,446 2,350

Midstream Natural gas, million cubic metres ...... 9,127 18,519 18,477 18,241 LPG ...... 2,735 5,357 4,924 4,709 Naphtha ...... 599 1,045 878 1,299 ______Notes: (1) Includes only the Group's share of joint ventures' operation results. (2) Excludes third-party volumes processed at SIBUR capacities. (3) Includes volumes processed at third-party capacities, under long-term agreements and excludes third-party volumes processed at SIBUR capacities.

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OPERATING AND FINANCIAL REVIEW

The following overview of the Group's financial condition and results of operations as of 30 June 2019 and for the six months ended 30 June 2019 and 2018 and as of and for the years ended 31 December 2018, 2017 and 2016 should be read in conjunction with the Interim Financial Statements and the Annual Financial Statements, respectively, and related notes included elsewhere in this Prospectus.

The following operating and financial review includes forward-looking statements that reflect the current views of the Group's management and involve inherent risks and uncertainties. The actual results of the Group's operations could differ materially from those contained in such forward- looking statements due to the factors discussed below and elsewhere in this Prospectus, particularly in the section entitled "Risk Factors".

The selected consolidated financial information in this section has been derived from the Interim Financial Statements and the Annual Financial Statements, in each case without material adjustment, unless otherwise stated, as well as from internal data concerning the Group contained in the Group's management financial reports.

REPORTABLE SEGMENTS

The Group operates as a vertically-integrated business, gathering and processing hydrocarbon feedstock, obtained from major Russian oil and gas companies, and producing and selling a wide range of petrochemical products as well as midstream products. As a result, the Group has three operating and reportable segments:

(1) Olefins and Polyolefins: a petrochemicals segment that produces polyolefins, such as polypropylene (PP) and polyethylene (PE) (LDPE), biaxially oriented PP films (BOPP- films), as well as olefins represented by propylene and ethylene produced at the Group's sites in Kstovo, Tomsk and Tobolsk, which are used internally by the Group's petrochemicals segments and sold externally (primarily sales of ethylene to RusVinyl). The ZapSibNeftekhim expansion project (for further details, see "Business — Overview of Business Segments — Olefins and Polyolefins Segment — ZapSibNeftekhim Investment Project") is expected to significantly increase the share of this segment in the Group's revenues from 2020.

(2) Plastics, Elastomers and Intermediates: a petrochemicals segment that produces a variety of products, such as (i) plastics and organic synthesis products comprising polyethylene terephthalate (PET), glycols, expandable polystyrene (EPS), alcohols and acrylates, (ii) elastomers comprising various grades of commodity and speciality rubbers and thermoplastic elastomers ("TPE"), and (iii) methyl tertiary butyl ether ("MTBE") and fuel additives, which are sold externally, (iv) other petrochemical intermediate products, including butadiene, isoprene, isobutylene, propylene, ethylene oxide, ethylene, benzene, styrene, pure terephthalic acid ("PTA"), which are primarily used within the segment, with a minor share being sold externally to the market.

(3) Midstream: a segment that comprises (i) gathering and processing of associated petroleum gas ("APG") that the Group purchases from major Russian oil companies, (ii) transportation, fractionation and other processing of natural gas liquids ("NGLs") that the Group produces internally or purchases from major Russian oil and gas companies, and (iii) production, marketing and sales of energy products, such as natural gas, liquefied - 70-

petroleum gases ("LPG") and naphtha. The Group uses these energy products as feedstock for its Olefins and Polyolefins segment and its Plastics, Elastomers and Intermediates segment, and sells the remainder on the Russian and international markets. Prior to 2018, this segment was named "Feedstock and Energy".

The Group's management assesses the performance of each operating segment based on its respective EBITDA contributions (see "Selected Financial and Other Information — Non-IFRS Financial Measures" for definition of EBITDA). The "Unallocated" category in the Group's segment discussion includes revenues and expenses of some of the Group's subsidiaries, which primarily provide energy supply, transportation, processing, managerial and other services to third parties and other Group entities and are not allocated to the operating segments.

SIGNIFICANT FACTORS AFFECTING THE GROUP'S RESULTS OF OPERATIONS

Macroeconomic and Other Economic Trends

The overall economic conditions in Russia and globally significantly impact the Group's operations as demand for the Group's products is driven by consumers from around the world across a diverse range of industries, which are dependent on the state of the global economy and the economies of their respective countries. The key end-customer industries that have a significant impact on demand for the Group's products are energy, automotive, construction, FMCG, chemical, energy and other industries.

GDP trends

One of the key factors that drives demand for the Group's products or otherwise affects its results of operations is global GDP trends. The Group is also subject to economic risks specific to the Russian Federation as all of its production assets are located in Russia (see "Risk Factors — Risks Relating to Russia — Political, Economic and Social Risks").

The following table contains selected data on year-on-year GDP growth for the six months ended 30 June 2019 and 2018 and the years ended 31 December 2018, 2017 and 2016:

Six months ended Year ended 30 June 31 December 2019 2018 2018 2017 2016 European Union (EU-15) ...... 1.2% 2.1% 1.8% 2.4% 1.7% United States ...... 2.8% 3.0% 3.1% 2.3% 1.6% China ...... 6.3% 6.8% 6.6% 6.9% 6.7% Russia ...... 0.7% 2.0% 2.3% 1.6% (0.2%) ______Source: Eurostat, U.S. Bureau of Economic Analysis, National Bureau of Statistics of the People's Republic of China, Russian Federal State Statistics Service

Foreign Exchange Rate Fluctuations

Movements of the Rouble against the U.S. dollar and Euro can have a significant effect on the Group's financial performance.

The following table presents selected data on exchange rate movements for the periods indicated:

Six months ended Year ended 30 June 31 December 2019 2018 2018 2017 2016 RUB/USD rate at the end of the period ...... 63.1 62.8 69.5 57.6 60.7 Average RUB/USD rate ...... 65.3 59.4 62.7 58.4 67.0 - 71-

Six months ended Year ended 30 June 31 December 2019 2018 2018 2017 2016 RUB/EUR rate at the end of the period ...... 71.8 73.0 79.5 68.9 63.8 Average RUB/EUR rate ...... 73.8 71.8 74.0 65.9 74.2 ______Source: CBR

The Group's functional and reporting currency is the Russian rouble. However, the Group's sales to countries outside Russia (43.5%, 41.4%, 42.2% and 42.2% of total revenue in the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016, respectively) were primarily denominated in U.S. dollars and, to a lesser extent, in Euro. For almost all of the Group's products, except natural gas, domestic sales are linked to international benchmark prices quoted in U.S. dollars and Euros; however, in the case of substantial shifts in the Rouble exchange rate, the adjustment of domestic selling prices can take a certain amount of time. At the same time, the Group's operating expenses are primarily denominated in Russian roubles. As a result, depreciation of the Rouble relative to the U.S. dollar or euro positively affects the Group's operational results, while appreciation of the Rouble relative to these currencies has a negative effect on the Group's operational results.

In addition, a significant part of the Group's borrowings are also denominated in foreign currencies, primarily in U.S. dollars and, to a lesser extent, in Euro. When the Rouble depreciates against the U.S. dollar or euro, U.S. dollar- or Euro-denominated liabilities increase in rouble terms, as do interest costs on the Group's foreign currency-denominated borrowings. Accordingly, the Group's financial expenses tend to increase as a result of the Rouble depreciation against foreign currencies, while net finance income tends to increase as a result of the Rouble appreciation against foreign currencies. When the Rouble appreciates against the U.S. dollar or Euro, liabilities denominated in these currencies decrease in rouble terms, as do interest costs on the Group's foreign currency- denominated borrowings. Accordingly, the Group's net finance income tends to increase as a result of foreign exchange gains recorded by the Group.

As of 30 June 2019, the Rouble appreciated by 9.2% relative to the U.S. dollar and by 9.6% relative to Euro compared to 31 December 2018. This resulted in foreign exchange gain reported in the Interim Financial Statements, which was largely attributable to the revaluation of the Group's foreign currency-denominated debt. As of 31 December 2018, the Rouble depreciated by 20.7% relative to the U.S. dollar and by 15.4% relative to Euro compared to 31 December 2017. This resulted in foreign exchange loss reported in the Annual 2018 Financial Statements, which was largely attributable to the revaluation of the Group's foreign currency denominated debt. As of 31 December 2017, the Rouble appreciated by 5.1% relative to the U.S. dollar and depreciated by 8.0% relative to Euro compared to 31 December 2016. This resulted in foreign exchange gain reported in the Annual 2017 Financial Statements, which was largely attributable to the revaluation of the Group's foreign currency-denominated debt. See also "— Crude Oil, Raw NGL, LPG and Naphtha Prices".

Inflation

Historically, Russia has reported higher inflation rates compared to developed markets. Increases in inflation may significantly affect the Group's financial results because of an increase in operating expenses, which are linked to the general price level in Russia, such as staff costs, rent and other factors.

Inflation fell rapidly in 2016 since mid-2015 when it reached its highest level in a decade. In 2017, the inflation rates of consumer prices continued their downward trends from 2016 as a result of the Russian Central Bank's moderately tight monetary and fiscal policy, and the positive impact

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of the Rouble strengthening on imported goods. Additionally, in 2017, wholesale prices increased on transportation, gas and electricity tariff indexation. In 2018, consumer inflation in Russia was 4.3% year-on-year, while producer inflation jumped to 11.6% year-on-year as a result of an increase in commodities prices and weakening of the Rouble. In the first half of 2019, consumer inflation in Russia was 4.7% year-on-year, while producer inflation decreased to 3.1% year-on- year as a result of a decrease in commodities prices.

The following table presents selected data on average inflation rates year-on-year for the periods indicated:

Six months ended Year ended 30 June 31 December 2019/2018 2018/2017 2017/2016 2016/2015 Consumer price index (CPI) ...... 4.7% 4.3% 2.5% 5.4% Producer price index (PPI) ...... 3.1% 11.6% 8.4% 7.4% ______Source: Rosstat

Interest rates

The Group borrows funds at both fixed and floating rates. As of 30 June 2019, 31.0% and 69.0% of the Group's total borrowings were at fixed and floating rates, respectively. As a result, the Group's financial results are sensitive to changes in interest rates on the floating rate portion of the Group's debt. See also notes 14 and 15 to the Interim Financial Statements. The Group currently does not use derivative instruments to hedge its interest rate risk.

Sanctions

In 2016, 2017, 2018 and the first half of 2019, the Russian economy withstood continued sanctions pressure and oil price shocks, when at the start of 2016 prices for oil reached their trough and to date have only partially recovered. The Group currently is not subject to any sanctions against legal entities. Management believes that sanctions imposed on other Russian entities have had no material effect on the Group's operational or financial performance and continues to closely monitor the situation and takes preventive measures to mitigate the negative effects of the changes in macroeconomic parameters. For a description of sanctions-related risks, see "Risk Factors — Risks relating to the Group's Business — Sanctions against Russia, its industries and/or individuals may have a material adverse effect on the Russian economy and the Group".

Cyclicality of the Petrochemicals Industry

Prices of petrochemical products are subject to significant fluctuations as they are influenced by trends in global and domestic supply and demand, including differences in supply and demand between domestic and export markets. Demand is generally linked to economic activity, while supply is linked to long-term investments in capacity expansion and structural changes in feedstock supply, such as, for example, the discovery and commercialisation of new feedstock sources such as shale gas in the United States. When significant new capacity becomes available and is not matched by corresponding growth in demand, average industry operating margins typically fall. At the same time, capacity additions require substantial lead times and, when growth in demand is not matched by respective capacity expansions, average industry operating margins typically rise. As a result, the petrochemicals industry experiences periods of tight supply, leading to high capacity utilisation rates and margins, followed by periods of oversupply, leading to reduced capacity utilisation rates and margins, and, accordingly, the profit margins of petrochemical producers historically have been cyclical.

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As the Group is vertically integrated into feedstock and energy businesses and is a net seller of energy products, which are not dependent on the cyclicality of the petrochemical industry, this partially protects the Group against margin pressures in the periods of oversupply in the petrochemicals industry. Additionally, the Group believes its access to attractively priced feedstock, a diversified feedstock mix, as well as a diversified product portfolio puts the Group in a more advantageous position compared to the majority of other petrochemical companies during market downturns in the petrochemicals industry.

Feedstock Sourcing and Mix

Types of Hydrocarbon Feedstock

To operate its business successfully the Group must obtain sufficient quantities of feedstock in a timely manner and at acceptable prices. Therefore, the Group's access to feedstock and its mix have a material impact on its financial results. The Group uses two major types of hydrocarbon feedstock: APG and NGLs, primarily raw NGL, as well as LPG and naphtha.

APG is a by-product of oil production. The Group processes APG at its gas processing plants ("GPPs") to produce natural gas and raw NGL. In the six months ended 30 June 2019, the Group's APG processing volumes increased by 2.0%, or to 11.0 billion cubic metres, and its raw NGL fractionation volumes (including volumes processed at capacity of Uralorgsintez, which was divested in April 2017) slightly decreased by 0.8% to 3.7 million tonnes, as compared to the six months ended 30 June 2018. APG accounted for 33.1% of its expenses related to third-party hydrocarbon feedstock purchases in the six months ended 30 June 2019. As a percentage of total feedstock and materials costs, APG accounted for 23.3% in the six months ended 30 June 2019.

In the year ended 31 December 2018, the Group's APG processing volumes remained flat at 22.3 billion cubic metres and its raw NGL fractionation volumes (including volumes processed at capacity of Uralorgsintez, which was divested in April 2017) increased by 2.5%, or to 7.7 billion cubic metres as compared to 31 December 2017. Growth in raw NGL fractionation in 2018 resulted in additional volumes of LPG, that were channelled to external sales. Higher purchased naphtha volumes were used internally in polyolefins production, while internally produced naphtha volumes were redirected to external sales. APG accounted for 32.5% of the Group's expenses related to third-party hydrocarbon feedstock purchases in the year ended 31 December 2018. As a percentage of total feedstock and materials costs, APG accounted for 23.3% in the year ended 31 December 2018.

NGLs are used as raw material by all the Group's operating segments. Raw NGL is produced as a result of APG processing or through stabilisation of unstable gas condensate which is obtained from the processing of wet natural gas extracted from gas fields. LPG and naphtha are produced through fractionation of raw NGL. The Group produces NGLs at its own GPPs and GFUs and also purchases them from third parties. NGLs accounted for 66.9% and 67.5% of its expenses related to third-party hydrocarbon feedstock purchases in the six months ended 30 June 2019 and the year ended 31 December 2018, respectively. As a percentage of total feedstock and materials costs, NGLs accounted for 47.1% and 48.4% in the six months ended 30 June 2019 and the year ended 31 December 2018, respectively.

Other Feedstock

Other feedstock includes primarily paraxylene, which is used in the production of PTA, methanol, which is used in the production of MTBE, and certain intermediate chemicals such as benzene, butadiene, and others, which the Group buys mainly from other petrochemical producers in addition to its own production of intermediates. - 74-

Feedstock Sourcing

The Group purchases APG and NGLs from major oil and gas companies in Western Siberia, including Rosneft, Gazprom Neft, RussNeft, NOVATEK and Gazprom, primarily under long-term contracts. See also "Risk Factors — Risks relating to the group's Business — The Group is dependent upon long-term relationships with a limited number of third-party feedstock suppliers".

As of 30 June 2019 and 31 December 2018, approximately 93% and 92% of the Group's planned APG supplies for the first half of 2019 and 2018 year, respectively, were guaranteed under multi- year supply contracts. Overall, as of 30 June 2019 and 31 December 2018, the Group's multi-year APG supply contracts had a weighted average maturity of 12.7 years and 13.6 years, respectively. Rosneft remained the Group's major APG supplier, with 75.3% and 73.5% share in the Group's total APG supplies in volume terms in the first half of 2019 and 2018, respectively.

As of 30 June 2019 and 31 December 2018, approximately 72% and 77% of the Group's planned NGLs supplies for the first half of 2019 and 2018 year, respectively, were guaranteed under multi- year supply contracts. Overall, as of 30 June 2019 and 31 December 2018, the Group's multi-year NGLs supply contracts had a weighted average maturity of 14.4 years and 15.4 years, respectively. The Group's major external raw NGL suppliers are NOVATEK and Gazprom, with 65.0% and 60.1% share in the Group's total NGLs supplies in volume terms in the first half of 2019 and 2018, respectively.

The Group and Gazprom Neft jointly operate Yuzhno-Priobskiy Gas Processing Plant ("Yuzhno- Priobskiy GPP") with an annual APG processing capacity of 900 million cubic metres as of 30 June 2019, each owning 50%. Gazprom Neft supplies APG to the plant for processing into raw NGL and natural gas. The Group pays for 50% of the total APG volumes supplied to the plant, while the remaining 50% is processed for Gazprom Neft. SIBUR obtains 50% of all raw NGL and dry gas volumes produced, while Gazprom Neft obtains the rest. Subsequently, the Group purchases Gazprom Neft's share of raw NGL and sells its share of natural gas to Gazprom Neft.

The Group works continually with all the largest oil and gas producers in Western Siberia with the view of extending the tenors of existing agreements and/or entering into new long-term supply contracts on both APG and NGLs supplies. Multi-year supply contracts and joint venture arrangements enhance the predictability of feedstock pricing and volumes and allow better planning of the Group's future operating expenses and investments, which is particularly important given the capital-intensive nature of the Group's investment programme.

As the Group is not a subsoil user, its NGL operations are not subject to the mineral extraction tax ("MET"), as raw NGL derived from gas condensate is not subject to MET. In addition, APG processing is not subject to MET.

Pricing

Oil companies produce APG as a by-product of oil extraction and, by law, must evacuate it from the field or otherwise utilise it. Failure to do so can result in fines and potentially jeopardise an oil company's licence to operate the field. Most oil companies in Western Siberia do not own gas processing facilities and have been reluctant to develop such facilities as this requires substantial capital investments, while oil companies prefer to invest in their core oil exploration and production business. Apart from being processed into hydrocarbon feedstock at a GPP, only limited volumes of APG can be used productively, mostly for power generation or for re-injection into the reservoir.

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The Russian Government has consistently increased incentives for oil companies to utilise APG. Based on the Russian Government's resolution issued in November 2012, penalties for APG flaring exceeding permitted thresholds (currently set at 5% of APG production volumes) have been substantially increased and have become material for oil companies: effective 1 January 2013, the penalty has been increased from 4.5x the standard emission charge in 2012 to 12x the standard emission charge in 2013 and 25x the standard emission charge starting from 2014. The standard emission charges depend on the type of pollutant and are regularly indexed. According to CDU TEK, the total volume of flared APG in Russia in 2018 was 15.7 billion cubic metres or 15% of total produced volumes, decreasing APG utilisation in Russia to 85% compared to 87% in 2017 mainly due to new oil fields coming on stream in Eastern Siberia. In Western Siberia APG utilisation remained largely flat at 91% in 2018 and 2017, according to Petromarket.

The Group provides oil companies with an attractive solution for APG utilisation; therefore, the Group is able to source APG at advantageous prices. Given the limited options for using APG and the lack of alternatives for evacuating it from oilfields, there is no market or benchmark price for APG. APG pricing is also not subject to government regulation. As a result, the Group purchases APG from oil companies at prices that are negotiated on a case-by-case basis and typically substantially differ from the FAS regulated natural gas prices. The magnitude of the difference and the absolute price for APG is dependent on the following key factors: the quality and composition of APG in terms of target liquid fractions content, distance of an APG source from the Group's GPPs, availability of collection and transportation infrastructure and capital and operating expenditures needed to construct, expand and maintain that infrastructure. The price is also dependent on the potential capital expenditures that the oil company would need to incur to construct its own gas processing capacity as an alternative to selling APG to the Group.

Currently, the Group has two types of APG purchase contracts:

• under the first contract type, the APG purchase price, once agreed upon in absolute terms, is typically regularly indexed to reflect changes in the FAS regulated prices for natural gas;

• under the second contract type, the APG purchase price is indexed in line with changes in prices for APG derivatives: basket of natural gas and raw NGL (see "— Crude Oil, Raw NGL, LPG and Naphtha Prices" and "— Natural Gas Prices").

Additional volumes of APG that the Group sources from oil companies (new volumes under new agreements or volumes under existing agreements that exceed initially pre-agreed or guaranteed volumes) can be supplied at a higher price due to additional capital and operating expenses incurred by oil companies to produce and deliver such volumes. Also, modification of terms of the existing agreements, either at expiry or as a result of renegotiation, may cause material changes in the Group's APG pricing levels.

Unlike APG, NGLs feedstock is typically priced with reference to international prices for LPG and naphtha, and to a lesser extent to domestic LPG prices, while prices for raw NGL, depending on its composition, are largely correlated with prices for LPG and naphtha. As the supply of NGLs significantly exceeds demand in Russia and particularly in Western Siberia, prices for NGLs are determined on an export netback basis, which reflects transportation costs and export duties. Transportation of NGLs out of Western Siberia is costly, with transportation costs consistently rising, reducing the prices at which NGLs are available in Western Siberia. Therefore, the domestic prices for NGLs feedstock in Western Siberia are substantially lower than those available to the majority of the Group's international petrochemical peers. The Group's NGL supply contracts are typically based on a formula linked to the respective netbacks and reflect the fraction content of NGLs, the need for and cost of fractionation and the capital expenditures required to construct and

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maintain the respective infrastructure, as well as the availability and quality of alternative selling channels that the oil or gas company supplying the NGLs has.

In the six months ended 30 June 2019, the Group purchased approximately 2.3 million tonnes of NGLs (including purchases for resale), 63.0% of which was raw NGL, 22.6% of which was naphtha and the remaining 14.4% of which was LPG. In the years ended 31 December 2018, 2017 and 2016, the Group purchased approximately 4.1 million tonnes, 3.6 million and 4.0 million tonnes of NGL (including purchases for resale), respectively, 65.4%, 72.1% and 75.1% of which, respectively, was raw NGL, 18.6%, 10.9% and 13.7% of which, respectively, was naphtha, and the remaining 16.0%, 17.0% and 11.2% of which, respectively, was LPG.

In the six months ended 30 June 2019, the Group purchased approximately 11.0 bcm of APG worth RUB 14.6 billion, which amounted to 23.3% of its total feedstock costs and 7.3% of its operating expenses. In the years ended 31 December 2018, 2017 and 2016, the Group purchased approximately 22.3 bcm, 22.3 bcm and 21.9 bcm of APG, respectively, worth RUB 30.4 billion, RUB 26.1 billion and RUB 22.4 billion, respectively, which amounted to 23.3%, 29.6% and 27.0% of its total feedstock costs, respectively, and 7.5%, 7.9% and 7.2% of its operating expenses, respectively.

In the six months ended 30 June 2019, the Group purchased approximately 2.0 million tonnes of NGLs, worth RUB 29.6 billion, which amounted to 47.1% of its total feedstock costs and 14.8% of its operating expenses. In the years ended 31 December 2018, 2017 and 2016, the Group purchased approximately 3.5 million tonnes, 3.0 million tonnes and 3.4 million tonnes of NGLs, respectively, worth RUB 63.2 billion, RUB 35.3 billion and RUB 26.8 billion, respectively, which amounted to 48.4%, 40.1% and 32.3% of its total feedstock costs, respectively, and 15.7%, 10.7% and 8.7% of its operating expenses, respectively.

See also "Business — Overview of Business Segments — Raw Materials Sourcing — Pricing".

Crude Oil, Raw NGL, LPG and Naphtha Prices

Prices for a large portion of the Group's feedstock and processed goods are directly or indirectly linked to oil or oil derivative prices. Increase in prices for oil or oil derivatives generally has a net positive effect on the Group's financial results because the Group's position as a net seller of energy products allows it to mitigate the negative effect that growth in oil and oil derivative prices has on the Group's cost base. Declines in prices for oil or oil derivatives generally have a net negative effect on the Group's financial results, which is partially offset by decrease in its cost base.

Crude oil prices typically influence the price of raw NGL, LPG and naphtha the Group purchases from third parties as feedstock. In addition, prices for LPG and naphtha are also influenced by supply and demand trends and other factors in their own markets, while prices for raw NGL, depending on its composition, largely correlate with prices for LPG and naphtha. In addition to purchasing raw NGL, LPG and naphtha from third parties, the Group also produces these products at its GPPs and GFUs, and uses them as feedstock for processing into the Group's petrochemical products or sells them externally. The Group ultimately only uses a part of the overall volumes of these energy products that it produces and purchases from third parties as feedstock, and, as a result, the Group is a net seller of these products. Sales of LPG and naphtha accounted for 33.4%, 33.4% and 29.6% of total revenue in the six months ended 30 June 2019 and the years ended 31 December 2018 and 2017, respectively, while sales of raw NGL, LPG and naphtha accounted for 29.7% of total revenue in the year ended 31 December 2016.

The Group anticipates, with the completion of the ZapSibNeftekhim project, that its financial results will be less exposed to the changes in prices for oil or oil derivatives, as historically - 77-

polyolefins to feedstock spreads were more stable and resilient to energy price volatility than the spreads between purchased APG feedstock and NGLs selling prices.

Oil prices have a significant impact on the Rouble exchange rate fluctuations. Historically, the Rouble has, though not consistently, appreciated against the U.S. dollar and euro when oil prices increased and depreciated against these currencies when oil prices decreased. Because prices for a large portion of the Group's products are linked to oil prices, declining oil prices tend to decrease the Group's revenue, while being mitigated by the positive effect of the weakening Rouble on export sales or domestic sales linked to the U.S. dollar or the euro (see "— Macroeconomic and Other Economic Trends — Foreign Exchange Rate Fluctuations").

Oil and oil derivative prices have historically been volatile and dependent on a variety of factors, including, among others, market supply and demand balances, geopolitical developments affecting the principal producing nations and force majeure events. See "Risk Factors — Risks Relating to the Group's Business — A decrease in oil and oil derivatives prices may affect the Group's results of operations". The following table presents average benchmark market prices for crude oil, naphtha and LPG for the period indicated:

Six months ended Year ended 30 June 31 December USD per tonne except as stated 2019 2018 2018 2017 2016 Brent (USD per barrel) ...... 66.0 70.6 71.0 54.3 43.7 Naphtha CIF NWE ...... 512.1 604.2 601.3 484.6 385.5 LPG DAF Brest ...... 383.4 438.5 464.4 395.8 296.4 LPG Sonatrach for Bethioua ...... 419.6 485.0 511.5 431.8 300.9 LPG Argus CIF ara (large) ...... 420.6 487.4 507.7 437.6 311.8 ______Source: Bloomberg, Argus

2018 was marked by continued recovery in crude oil prices as compared to the corresponding period of 2017, with Brent growing by 30.8% year-on-year and averaging USD 71.0 per barrel. Naphtha and LPG international benchmarks largely followed this trend, while prices for petrochemicals products showed mixed dynamics affected by market-specific drivers for each product group.

The first half of 2019 was marked by persistent volatility in oil prices and as a result the average Brent price in the first half of 2019 was 6.5% lower compared to the first half of 2018. Hydrocarbon prices reflected this dynamic, posting a much larger decline of LPG and naphtha benchmarks driven by higher LPG volumes imported from the United States to Europe and lower demand for naphtha as a feedstock for chemical producers.

Export Duties on LPG and Naphtha

The LPG and naphtha (excluding pentane and isopentane) that the Group exports are subject to export duties, which are set monthly by the Ministry of Economic Development. Export sales to member states of the Customs Union (Republic of Belarus, Republic of Kazakhstan, Republic of Armenia and Kyrgyz Republic) are not subject to export duties.

The export duty on LPG (excluding butane and isobutane) is formula-based and depends on the international benchmark price of LPG (LPG DAF Brest). When the market price for LPG is below USD 490 per tonne, no export duty is levied. Effective 1 January 2015, the Russian Government imposed an export duty on butane and isobutane, which is calculated as the percentage of the export duty on LPG grades excluding butane and isobutane. It was set at 20% for 2016, at 30% for 2017 and 40% for 2018, with successive annual increases up to 90% effective 1 January 2022. In August – December 2018, an export duty on LPG was imposed following a price increase to the - 78-

level above USD 490 (average LPG DAF Brest was USD 490.4 per tonne in the second half of 2018).

The export duty on naphtha is calculated as a percentage of export duties on crude oil (Urals). On 1 July 2012, the export duty on naphtha was set at 90% of the crude oil export duty. In January 2015, the Russian Government set the export duty on naphtha at 85% of the crude oil export duty. For 2016, this rate was set at 71%, and starting from 2017 at 55%. The decrease in export duty rates for naphtha is implemented as part of the "tax programme" in the Russian oil industry.

Recoverable excise tax was introduced as a part of the tax programme. The Russian Tax Code defines a procedure for calculation of excise duties and tax deductions with respect to domestic sales and processing of naphtha, benzene and paraxylene. Local companies are eligible to receive an excise duty refund ("recoverable excise") with a scale-up factor if the product is processed into non-excisable petrochemical products. The scale-up factor for naphtha was set at 1.7x for 2017 and 2018, and at 3.4x for paraxylene and benzene. The excise duty for naphtha was set at RUB 13,100 per tonne for 2017 and 2018 and at RUB 2,800 per tonne for paraxylene and benzene for 2017 and 2018. In 2018 and 2017, the Group processed 1,195 thousand tonnes and 1,024 thousand tonnes of naphtha into non-excisable petrochemical products, respectively.

As Russia's domestic prices for raw NGL, LPG and naphtha are based on export netback prices, higher export duties reduce the domestic price for these products, while declining export duties support domestic prices. Increases in export duties negatively affect the Group's export and domestic sales of LPG and naphtha, at the same time reducing its feedstock purchasing costs. Decreases in export duties as a result of declining prices for LPG and naphtha support the Group's external export and domestic sales of these products. The following table presents average export duties on LPG and naphtha for the periods indicated:

Six months ended Year ended 30 June 31 December 2019 2018 2018 2017 2016 (USD per tonne) LPG excl. butane and isobutane ...... — 0.0 10.2 — 0.0 butane and isobutane ...... — 0.0 4.0 0.0 0.0 Naphtha (excl. pentane and isopentane) ...... 52.5 65.3 70.4 47.7 53.6 ______Source: Russian Government

Natural Gas Prices

The prices at which the Group purchases a large portion of its feedstock and sells its natural gas, and the Group's utility costs are significantly impacted by changes in regulated domestic gas prices at which Gazprom, the major Russian gas producer, sells natural gas on the domestic market. This price regulation is executed by the Russian Government, through the FAS. Although this price regulation does not apply to independent gas producers, the regulated price significantly influences domestic market conditions and effective selling prices.

In 2015, wholesale natural gas prices for sales to all customer categories (excluding residential customers) on the domestic market were increased by the FAS effective from 1 July by 7.5% and remained unchanged through the end of 2016 and the first half of 2017, demonstrating more resilient performance in U.S. dollar-terms compared with international gas price benchmarks.

Effective 1 July 2017, the FAS increased wholesale natural gas prices for sales to all customer categories (excluding residential customers) on the domestic market by 3.9%. Effective from 21 August 2018, natural gas prices were increased by 3.4%. Starting from 1 July 2019, the - 79-

wholesale natural gas prices were further increased by 1.4%. Such increase corresponded to the main parameters of the "Forecast of Socio- of the Russian Federation for the period up to 2024". The forecast envisages an increase in wholesale natural gas prices for sales to all customer categories (excluding residential customers) from 1 July 2019 by 1.4% and by not more than 3% in 2020-2024. The Russian Government continues to discuss various concepts relating to the natural gas industry development, including natural gas prices and transportation tariffs growth rates on the domestic market.

Although the Group is not subject to the Russian Government's regulation of prices for natural gas that it produces from APG, its effective average selling prices for natural gas are close to the regulated gas prices and are typically also indexed in line with regulated price changes. The Group is a net seller of natural gas, and historically its financial results have been positively impacted by increases in domestic natural gas prices. The impact of natural gas price indexation on costs is offset by the Group's natural gas sales.

Prices for APG, one of its key feedstock, are not regulated by the Russian Government. There is also no benchmark market price for APG. Prices at which the Group purchases APG from oil companies are negotiated on a case-by-case basis and depend on a variety of factors (see "— Feedstock Sourcing and Mix"). The Group typically purchases APG at a price that substantially differs from the regulated domestic natural gas prices because of the significant capital expenditures required to develop and maintain its processing and transportation infrastructure. At the same time, some of its supply contracts regularly index APG prices to reflect changes in the regulated domestic gas prices. Such indexations, however, are not always synchronised with the respective changes in the regulated domestic gas prices. Additionally, there are other factors that influence its APG purchase prices; hence there may be certain discrepancies between movements in its APG purchase prices and the regulated domestic gas prices (see "— Feedstock Sourcing and Mix" above for further details).

Transportation Tariffs

The Group incurs substantial transportation costs due to the geographic spread of its operations. For its transportation services the Group uses pipelines, railway, port facilities, trucks and multimodal transportation services. While the Group operates its own gas and raw NGL pipelines, the Group also uses third-party transportation services. See "Business — Transportation and Logistics". Third-party transportation expenses accounted for 19.9%, 18.6%, 20.3% and 23.9% of the Group's operating expenses in the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016, respectively. Changes in transportation tariffs and prices for these services have a significant effect on the Group's operating expenses.

Railway Transportation Tariffs

The Group uses rail for the transportation of its refined products, intermediates and feedstock, including all of the Group's LPG, naphtha and MTBE, certain volumes of raw NGL, and a major part of the Group's petrochemical products.

The Group's rail transportation costs comprise a transportation tariff charged for access to Russia's main railway and usage of locomotives (the "Railway Tariff"), which accounts for the majority of the Group's total rail transportation costs. The Railway Tariff is charged by Russian Railways, Russia's state-owned monopoly, and is regulated by the FAS. The Railway Tariff is specific to types of products, types of carriers and their tonnage, transportation routes and volume of a delivery. The FAS reviews the Railway Tariff on an annual basis.

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Effective from 3 January 2016, the FAS increased the railroad transportation tariff by 9%. Effective 1 January 2017, the FAS increased the tariff by 4%, with a subsequent increase of 2% effective 9 January 2017. In January 2018, the FAS increased the railway transportation in several steps, which effectively totalled 5.4%. Starting from January 2019, the FAS increased the railway transportation tariff in several steps, which effectively totalled 3.6%.

Effective from 29 January 2015, Russian Railways implemented a 13.4% tariff surcharge for deliveries of all types of the Group's products within the Russian Federation territory to the export markets. Effective from 1 January 2017, Russian Railways cancelled the 13.4% tariff surcharge for deliveries of oil derivatives to the export market. Effective from 29 January 2017, Russian Railways set the tariff surcharge at 10% for all types of products, while for LPG it came into effect on 12 February 2017, and was cancelled for other types of oil derivatives products. Effective from January 2018, the export tariff surcharge was reduced to 8%. Effective from January 2019, the export tariff surcharge remained at the level of 8%. See "Risk Factors — Risks Relating to the Group's Business — Disruption in railway transportation or increases in costs related to railway transportation could adversely impact the Group's results of operations" and also "Business — Transportation and Logistics".

Energy Procurement

The Group's business is energy-intensive. Electricity, fuel and heat account for the largest portion of the Group's energy costs. As a result, changes in tariffs for electric power and heat, as well as natural gas prices have a significant effect on the Group's operating expenses.

Electricity

The Group makes electricity purchases on a centralised basis. In addition to purchases of electricity for internal needs, the Group also buys electricity for further resale to third parties, which, inter alia, include other companies located at the Group's production sites. Revenue from sales of electricity to third parties is reported under "Other revenue" in the Interim Financial Statements and the Annual Financial Statements.

The Russian electricity market has been liberalised gradually over the past few years. However, maximum levels of electricity prices remain under the supervision of the FAS and regional regulatory authorities. The Group's electricity price is substantially lower than the average price for electricity in Russia. One of the most important factors that influences electricity prices is fuel cost (primarily natural gas and coal) and increases in natural gas prices tend to result in higher electricity prices. The Group also owns and continues to expand its own electric power generating capacity in order to reduce its exposure to higher electricity prices from third-party suppliers. In 2014, the Group launched an 18MW power plant at the Perm production site. In February 2016, the Group acquired Tobolsk Heating and Power Plant ("Tobolsk HPP") which has a power capacity of 665MW. At the Group's level, internal electric power generation accounts for an insignificant share in total electricity consumption (also see "Business — Overview of Business Segments — Raw Materials Sourcing — Electricity").

Heat

The Group sources heat (in the form of steam and hot water) from regional suppliers at regulated prices. Heat energy prices are also largely dependent on prices for natural gas. In order to minimise the Group's dependence on third-party providers, the Group generates a substantial portion of heat energy at its own production sites. In February 2016, the Group acquired Tobolsk HPP with the capacity of 2,585 MW (or 2,223 gigacalories) of heat. This plant is the only supplier of steam for the Group's Tobolsk production site. At the Group level, the share of internally generated heat - 81-

accounted for 76.5%, 76.4% and 73.0% of total consumed volumes in the years ended 31 December 2018, 2017 and 2016, respectively.

Fuel

The Group sources fuel (mainly represented by natural gas) at prices linked primarily to regulated natural gas prices. The Group utilises fuel mainly for electricity and heat generation at its production sites. The Group also utilises some volumes of natural gas produced at its GPPs, as well as gas produced as a by-product at other sites. Starting from 2016, the Group significantly increased fuel consumption volumes due to the acquisition of Tobolsk HPP. In the first half of 2019, and 2018 and 2017 years, the share of fuel produced internally accounted for approximately half of total consumption volumes.

The Group's ability to sell natural gas enables it to balance its exposure to growth in energy and utilities costs, which to a large extent are influenced by increases in natural gas prices.

The following table presents volumes purchased and effective average prices for electricity, tariffs for heat and fuel for the periods indicated:

Six months ended 30 June 2019 2018 Volume Average Volume Average tariff tariff Electricity (millions of kw/hour or RUB per kw/hour) ...... 5,268 2.52 5,020 2.27 Heat (thousands of Gcal or RUB per Gcal) ...... 2,500 1,031 2,631 1,019 Fuel (natural gas, billions of cubic metres or RUB per cubic metre) ...... 1,196 3.85 1,125 3.72

Year ended 31 December 2018 2017 2016 Volume Average Volume Average Volume Average tariff tariff tariff Electricity (millions of kw/hour or RUB per kw/hour) ...... 10,233 2.34 10,212 2.24 10,025 2.12 Heat (thousands of Gcal or RUB per Gcal) ...... 4,966 1,030 5,080 1,036 5,753 962 Fuel (natural gas, billions of cubic metres or RUB per cubic metre) ...... 2,167 3.77 2,291 3.61 2,183 3.60

Tax Programme

Following the decline in the price of oil and its derivatives in 2014-2015, the government initiated tax reforms in the oil sector that assumed a reduction of oil export duties, from 42% to 30%, by 2017, coupled with an increase in the mineral extraction tax (MET) charge. At the same time, a negative excise duty on oil products was introduced to balance the detrimental impact on petrochemical and refinery margins because of the increased netback price of naphtha. The government regulation has since evolved, resulting in the tax programme being formally completed in June 2018.

According to a new regulation being currently discussed at the State Duma, the purpose of the tax programme is to fully abolish export duties and replace them with a higher MET by 2024. Phasing out export duties will result in higher domestic netback prices for oil and oil products, including naphtha, leading to weaker competitiveness of the local petrochemical industry. The government therefore plans to smooth this effect by introducing a negative excise duty charge on oil products, which will absorb the volatility of the oil price in order to ensure that local fuel prices remain relatively stable. The negative excise duty will be applied to refineries and petrochemical companies that meet certain requirements (produce high-grade fuel and petrochemical products, - 82-

or sell significant volumes of their products in the local market). Some of the Group's operating entities are eligible to receive the negative excise charge and therefore reduce the cost of consumed feedstock and raw materials.

Effect of new standards and changes in accounting policies

Adoption of IFRS 16

Adoption of IFRS 16 starting from 1 January 2019 led to changes in the Group's accounting policies. The Group applied a modified retrospective approach and did not restate comparative financial information for prior periods. Therefore, certain financial statement items as of 30 June 2019 are not directly comparable with 2018, 2017 and 2016, as described below. Lease contracts of the Group are represented by long-term leases of shipping vessels that the Group uses to transport its produced goods to customers. Before adoption of the IFRS 16 the lease contracts of the Group were accounted for as operating leases that implied recognition of payments under lease contracts within operating expenses. IFRS 16 makes no distinction between operating and finance leases with respect to lessees. Instead, a lessee is required at the commencement of the lease to recognise (i) a "right of use" asset, and (ii) a lease liability. Therefore, the adoption of IFRS 16 resulted in an exclusion of operating lease expenses from operating expenses, recognition of additional depreciation charge of property, plant and equipment representing right-of-use assets and recognition of additional finance expenses resulted from lease liability. Cash payments for lease liabilities are now presented within financial activities in the cash flow statement instead of operating cash flows as was the case before adoption of the new standard.

The net effect of the adoption of IFRS 16 on the consolidated profit of the Group for the six months ended 30 June 2019 is almost neutral. However, the adoption of IFRS 16 results in increase in EBITDA and Adjusted EBITDA due to shift from recognition of operating lease expense within operating expenses in previous periods to recognition of finance costs and depreciation which are excluded from the EBITDA calculation. Furthermore, since IFRS 16 requires operating leases entered as a lessee to be treated as finance leases, the application of the standard resulted in a significant increase in total borrowings and Net Debt of RUB 17,489 million as of 30 June 2019 compared to the amount of such borrowings if IFRS 16 were not applied.

Change in accounting policy

In 2018, the Group has changed its accounting policy in respect of presentation of proceeds from grants received for the purchase of property, plant and equipment in consolidated cash flow statement. Therefore, proceeds from grants received are presented within investing activity instead of financing activity. Proceeds from grants for the year ended 31 December 2016 were reclassified in this Prospectus to conform the presentation of the Interim Financial Statements and the Annual 2018 Financial Statements.

Effective 1 January 2019, the Group also changed its accounting policy in respect of expenses related to property, plant and equipment maintenance carried out on an at least annual basis. Such expenses are capitalised as part of property, plant and equipment and are depreciated until next scheduled maintenance. Since the effect of the change in accounting policy is not material no retrospective adjustment was made.

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DESCRIPTION OF SELECTED FINANCIAL ITEMS

Principal financial items of the Group's financial and operational performance are described below.

Revenue

In this Operating and Financial Review, and elsewhere in this Prospectus, unless otherwise stated, revenue represents revenue from sales to third parties, which excludes any inter-segment transfers. It is reported net of VAT, excise taxes and export duties, and includes transportation costs incurred in relation to the delivery of respective refined products to the customers.

Operating expenses

The Group's operating expenses include the following principal items:

Feedstock and materials

Feedstock and materials include purchases from third-party suppliers of various types of feedstock and intermediates, which are used for further processing into higher value-added products and materials. The Group's raw materials are represented by hydrocarbon feedstock, such as APG and NGLs, which comprise raw NGL, LPG and naphtha, as well as paraxylene, which is used in the production of PTA and PP, which is used in the production of BOPP-films. The Group also purchases other feedstock and materials. Other feedstock includes methanol, used in the production of MTBE, and certain intermediate chemicals such as butadiene, benzene and others. The Group purchases intermediates in addition to its own production of intermediates primarily for further processing into higher value petrochemical products. Materials primarily include supplementary raw materials and spare parts used by JSC NIPIgaspererabotka ("NIPIGAS") under certain contracts for project management and construction services, as well as supplementary raw materials. Amounts of recoverable excise are reported under feedstock and materials expenses.

Transportation and logistics

Transportation and logistics comprise expenses related to the transportation of feedstock, materials and refined products by railway, via pipelines that are not owned and operated by the Group, by trucks, as well as through multimodal transportation operators. These costs also include transhipment and storage services, as well as charges for rail cars/tankers used by the Group under short-term transportation contracts, and operating lease contracts related to rail cars and marine vessels, which are used by the Group to transport its goods to customers. Transportation and logistics costs are related to third-party services and exclude expenses associated with JSC SIBUR- Trans' (the Group's subsidiary) activities and maintenance of the Group's own gas and product pipelines.

In October 2018, the Group and SG-Trans, one of the country's major railway operators, set up PTC, a transportation joint venture. As part of the transaction the Group sold its LPG tank car fleet worth RUB 9.5 billion to PTC via a leasing company. The JV was set up with a parity ownership split between the Group and SG-Trans. While reserving part of PTC's transportation services for the Group's own needs, the deal also provides the JV with the ability to offer freight transportation services to third parties.

Rent expenses

Rent expenses represent primarily lease payments for buildings and land plots on which the Group's facilities are located. - 84-

Goods for resale

Goods for resale include purchases of products from third parties for further resale externally, including refined products and intermediates.

Energy and utilities

Energy and utilities costs primarily comprise expenses associated with purchases of electric power, heat and fuel from third-party suppliers.

Staff costs

Staff costs comprise primarily salaries, bonuses and other personnel incentives, severance payments, pension expenses and related social taxes.

Depreciation and amortisation

Depreciation comprises the depreciation of property, plant and equipment calculated on a straight- line basis to allocate the cost of property, plant and equipment to their respective residual values over their respective estimated useful lives (except for depreciation of catalysts, which are depreciated using the unit-of-production method). Depreciation also includes depreciation of right- of-use assets which is charged using the straight-line method to the earlier of the end of its useful life or the end of the lease term. Amortisation comprises the amortisation of intangible assets calculated using a straight-line method to allocate the cost of relevant intangible assets over their estimated useful lives.

Repairs and maintenance

Repairs and maintenance comprise services for repairs and maintenance of the Group's production facilities provided by third parties, as well as spare parts, materials for auxiliary workshops and other operating supplies. These expenses include, inter alia, expenses incurred in relation to the implementation of one-off targeted programmes.

Processing services of third parties

Processing services represent services the Group obtains from other manufacturers, including its non-consolidated joint ventures, to process its feedstock/intermediates into higher value products. The Group's decision to use such services depends on existing agreements, market trends, logistical issues and shortages in the Group's own capacity.

Services provided by third parties

Services provided by third parties comprise services related to environmental and industrial safety, R&D, design and engineering, security expenses, as well as legal, audit, consulting services etc.

Taxes other than income tax

Taxes other than income tax primarily include land tax and property tax.

Charity and sponsorship

Charity and sponsorship comprise costs that are associated with making various charitable and sponsorship contributions. The Group places a very high degree of importance on social responsibility. As a major investor in the economic development of the regions where the Group

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operates, it has signed mutually beneficial agreements with a number of regional authorities, including agreements on socioeconomic cooperation. As part of its social initiatives, the Group has implemented a range of humanitarian projects and programmes in several regions, including Western Siberia, the Nizhny Novgorod regions and other areas, where it is implementing its strategic investment projects. This includes investments in regional infrastructure, improvement of people's life quality, ecological initiatives, support of sports organisations, promotion of sport for children and youth sports etc. The Group also actively promotes chemical science and professional education in Russia in cooperation with leading chemical institutions, universities and schools.

Marketing and advertising

Marketing and advertising costs are associated with the promotion of the Group's corporate brand and are aimed at enhancing its profile among customers, suppliers, partners and with the general public. The majority of the Group's marketing and advertising expenses relate to corporate sponsorships of leading Russian and regional football, hockey, basketball and volleyball teams in different regions of Russia, including Tyumen and Nizhny Novgorod, which positions the Group as an active promoter of Russian sports both nationally and in the regions where it operates.

Additionally, marketing and advertising costs include promotion of the Group's corporate brand and selected products at industrial exhibitions, conferences and forums, as well as via TV, print media and the Internet.

Change in work-in-progress ("WIP") and refined product balances

The WIP and refined product balances represent an adjustment to expenses associated with the production of refined products to reflect changes in the inventory balances of such products. When inventory balances of refined products increase at the end of a reporting period compared to the beginning of the respective period, operating expenses are reduced by an amount, which represents the cost of production of such refined products incurred in the reporting period, while revenue from sale of these products will be recognised in the future. When inventory balances of refined products decrease at the end of a reporting period compared to the beginning of the respective period, operating expenses are increased by an amount, which represents the cost of production of such refined products incurred in the preceding periods, while revenue from the sale of these products is recognised in the reporting period.

The Group's volumes of refined product balances fluctuate from period to period depending on market conditions, changes in marketing and distribution strategy, as well as logistical constraints. They also tend to increase in the periods of completion of the Group's major investment projects, which may trigger substantial inventory accumulation.

Equity-settled share-based payment plans

Equity-settled share-based payment plans represent equity settled share-based payment plans to certain current and former directors and members of the key management of the Group. In accordance with IFRS 2 "Share-based Payment", the Group had to recognise service costs associated with the plans as operating expenses in the consolidated statement of profit or loss, and also record the corresponding amounts as an increase in equity.

Operating profit

Operating profit represents revenue less operating expenses.

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Finance income and expenses

Finance income includes, primarily, interest income on bank deposits and loans issued and foreign exchange gains. Finance expenses include, primarily, interest expense on debt and bank charges, and foreign exchange losses.

Share of net income/(loss) of joint ventures and associates

Share of net income/(loss) of joint ventures and associates represents the Group's share of post- acquisition profit or loss of joint ventures and associates as recognised under the equity accounting method.

Income tax expense

The Group does not pay corporate income tax on a consolidated basis since, for taxation purposes, the members of the Group are assessed individually. The statutory corporate income tax rate in Russia was set at 20% for the periods under review.

RECENT DEVELOPMENTS

In July 2019, the Group and Gazprom Neft have consolidated 100% of the authorised capital in Poliom, a PP plant in Omsk. Sibgazpolimer, an equal share joint venture of the two companies, has signed an agreement to acquire a 50% stake in Poliom from the Titan Group. After completing all corporate and registration procedures, Sibgazpolimer has become the sole member of Poliom, which is to be operated jointly by Gazprom Neft and the Group.

Results of Operations

Segment analysis

The following table presents segment data on the Group's revenue, EBITDA and EBITDA Margin for the six months ended 30 June 2019 and 2018 and the years ended 31 December 2018, 2017 and 2016.

Six months ended Year ended 30 June 31 December 2019(2) 2018 2018 2017 2016 (RUB millions, except as stated) Revenue ...... 266,279 257,694 568,647 454,619 411,812 Olefins and Polyolefins Segment ...... 49,121 48,189 100,862 88,135 86,830 Plastics, Elastomers and Intermediates Segment ...... 79,049 78,151 171,003 146,877 130,690 Midstream Segment ...... 114,706 106,526 240,818 184,199 170,708 Unallocated ...... 23,403 24,828 55,964 35,408 23,584

Total Segment Revenue ...... 302,161 296,242 658,007 523,273 461,989 Olefins and Polyolefins Segment ...... 62,682 60,653 130,899 112,910 107,426 Plastics, Elastomers and Intermediates Segment ...... 80,333 79,584 174,006 149,710 132,379 Midstream Segment ...... 134,706 130,438 294,790 223,484 196,025 Unallocated ...... 24,440 25,567 58,312 37,169 26,159

EBITDA(1) ...... 86,116 89,188 201,007 160,851 139,629 Olefins and Polyolefins Segment ...... 22,649 18,988 37,679 44,636 48,909 Plastics, Elastomers and Intermediates Segment ...... 10,774 15,984 34,816 33,037 31,508 Midstream Segment ...... 56,232 55,138 127,107 86,672 60,526 Unallocated ...... (3,539) (922) 1,405 (3,494) (1,314)

EBITDA Margin(1) ...... 32.3% 34.6% 35.3% 35.4% 33.9% Olefins and Polyolefins Segment ...... 36.1% 31.3% 28.8% 39.5% 45.5% - 87-

Six months ended Year ended 30 June 31 December 2019(2) 2018 2018 2017 2016 (RUB millions, except as stated) Plastics, Elastomers and Intermediates Segment ...... 13.4% 20.1% 20.0% 22.1% 23.8% Midstream Segment ...... 41.7% 42.3% 43.1% 38.8% 31.0% Unallocated ...... <0% <0% 2.4% <0% <0%

Adjusted EBITDA(1) ...... 92,246 91,548 205,529 164,964 146,221 Olefins and Polyolefins Segment ...... 27,430 23,212 46,507 51,790 57,752 Plastic, Elastomers and Intermediates Segment ...... 10,681 15,873 34,611 32,938 31,441 Midstream Segment ...... 56,543 55,472 127,771 87,415 61,211 Unallocated ...... (2,408) (3,009) (3,360) (7,179) (4,183) ______Notes: (1) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures". (2) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

Results of Operations for the Six Months Ended 30 June 2019 and 2018

The following table sets forth the Group's consolidated selected profit or loss data and selected non-IFRS measures for the six months ended 30 June 2019 and 2018:

Six months ended 30 June % of 2019(1) revenue 2018 % of revenue Change (RUB millions, except as stated) Revenue ...... 266,279 100.0% 257,694 100.0% 3.3% Olefins and Polyolefins Segment ...... 49,121 18.4% 48,189 18.7% 1.9% Plastics, Elastomers and Intermediates Segment ...... 79,049 29.7% 78,151 30.3% 1.1% Midstream Segment ...... 114,706 43.1% 106,526 41.4% 7.7% Unallocated ...... 23,403 8.8% 24,828 9.6% (5.7%) incl. Revenue from Project Management and Construction Services ...... 16,548 6.2% 17,348 6.7% (4.6%) Operating expenses ...... (199,548) (74.9%) (186,084) (72.2%) 7.2% Operating profit ...... 66,731 25.1% 71,610 27.8% (6.8%) Net finance income/(expense) ...... 26,349 9.9% (13,750) (5.3%) >100% Share of net income of joint ventures and associates .... 3,723 1.4% 1,462 0.6% >100% Profit before income tax ...... 96,803 36.4% 59,322 23.0% 63.2% Income tax expense ...... (19,195) (7.2%) (13,454) (5.2%) 42.7% Profit for the reporting period, including attributable to: ...... 77,608 29.1% 45,868 17.8% 69.2% Non-controlling interest ...... 1,407 0.5% 1,799 0.7% (21.8%) Shareholders of the parent company ...... 76,201 28.6% 44,069 17.1% 72.9%

Non-IFRS measures Adjusted EBITDA(2) ...... 92,246 34.6% 91,548 35.5% 0.8% EBITDA(2) ...... 86,116 32.3% 89,188 34.6% (3.4%) EBITDA Margin(2) ...... 32.3% 34.6% EBITDA(2) of reportable segments: Olefins and Polyolefins ...... 22,649 8.5% 18,988 7.4% 19.3% Plastics, Elastomers and Intermediaries ...... 10,774 4.0% 15,984 6.2% (32.6%) Midstream ...... 56,232 21.1% 55,138 21.4% 2.0% ______Notes: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

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(2) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial Information — Non-IFRS Financial Measures".

Revenue

In the first half of 2019, the Group's revenue increased by 3.3% year-on-year to RUB 266,279 million from RUB 257,694 million in the first half of 2018 as a result of the following factors:

• an increase in the Olefins and Polyolefins segment revenue by 1.9% to RUB 49,121 million from RUB 48,189 million in the first half of 2018 due to higher revenues from PP, BOPP- films and ethylene as a result of higher selling prices which were largely offset by a decrease in the revenue from PE sales as a result of both lower selling prices and sales volumes;

• a moderate increase in the Plastics, Elastomers and Intermediates segment by 1.1% to RUB 79,049 million from RUB 78,151 million in the first half of 2018 as a result of mixed dynamics within the product group, mainly due to higher elastomer sales volumes and selling prices, which was partly offset by a decrease in sales of MTBE due to lower volumes of MTBE purchased for resale;

• an increase in Midstream segment revenue by 7.7% to RUB 114,706 million from RUB 106,526 million in the first half of 2018 mainly due to higher sales volumes across the product group and natural gas selling prices;

• a decrease in Unallocated category revenue by 5.7% to RUB 23,403 million to RUB 24,828 million in the first half of 2018 due to lower revenues from NIPIGAS services.

The following table sets forth the breakdown of revenue by geographical region for the six months ended 30 June 2018 and 2018:

Six months ended 30 June 2019 2018 (RUB millions) Russia ...... 150,538 148,872 Europe ...... 82,256 81,316 Asia ...... 17,214 12,837 CIS ...... 12,699 12,109 Other ...... 3,572 2,560 Total revenue ...... 266,279 257,694

Olefins and Polyolefins Segment

The following table sets forth a selected financial data of the Olefins and Polyolefins segment for the six months ended 30 June 2019 and 2018:

Six months ended 30 June % of % of external external 2019 revenue 2018 revenue Change (RUB millions, except as stated) Total Segment Revenue ...... 62,682 60,653 3.3% External Revenue ...... 49,121 48,189 1.9% PP ...... 23,746 48.3% 23,197 48.1% 2.4% PE (LDPE) ...... 9,738 19.8% 10,372 21.5% (6.1%) - 89-

Six months ended 30 June % of % of external external 2019 revenue 2018 revenue Change (RUB millions, except as stated) BOPP-films ...... 9,406 19.1% 8,919 18.5% 5.5% Ethylene ...... 3,595 7.3% 3,265 6.8% 10.1% Other polymer products...... 2,079 4.2% 2,051 4.3% 1.4% Other sales ...... 557 1.1% 385 0.8% 44.7% EBITDA(1) ...... 22,649 18,988 19.3% EBITDA margin(1) ...... 36.1% 31.3% including EBITDA of PP production in Tobolsk ...... 9,449 8,131 EBITDA margin of PP production in Tobolsk.. 49.8% 46.5% JV contribution (the Group's portion of EBITDA of joint ventures and associates) ...... 4,781 4,224 13.2% Adjusted EBITDA(1) ...... 27,430 23,212 18.2% ______Note: (1) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures".

External Revenue

In the first half of 2019, the Group's Olefins and Polyolefins external revenue increased by 1.9% to RUB 49,121 million from RUB 48,189 million in the first half of 2018, mainly as a result of positive dynamics in the average selling prices for PP and BOPP-films in rouble terms despite lower sales volumes for PP, PE and BOPP-films. The Group observed negative pricing dynamics in the international markets, while the Group's selling prices were supported by the Rouble depreciation and temporary PP supply disruptions in the first half of 2019 as a result of unplanned maintenance shutdowns in Russia and the CIS. The latter factor helped the Group to increase its share in the Russian market. The decrease in PP sales volume was due to the accumulation of finished goods before the start of propylene supplies to ZapSibNeftekhim as part of its commissioning and production testing works. The decrease in PE sales volumes was driven by on- purpose cut-back in the Tomsk production rate aimed at product quality improvement.

EBITDA

In the first half of 2019, the Group's Olefins and Polyolefins EBITDA increased by almost 19.3% to RUB 22,649 million from RUB 18,988 million in the first half of 2018. Such increase was mainly due to a decline in the purchase price of feedstock in rouble terms and the growth in PP and BOPP-films selling prices. Decreases in PP and PE sales volumes were fully offset by the change in the sales structure in favour of the domestic market and higher ethylene sales volumes due to the biennial maintenance cycle in Kstovo.

In the first half of 2019, the segment EBITDA margin increased to 36.1% from 31.3% in the first half of 2018.

The Group's share in EBITDA of joint ventures and associates increased by 13.2% to RUB 4,781 million from RUB 4,224 million in the first half of 2018. RusVinyl was the key contributor to the growth as a result of a wider spread between PVC prices and ethylene feedstock.

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Plastics, Elastomers and Intermediates Segment

The following table sets forth a selected financial data of the Plastics, Elastomers and Intermediates segment for the six months ended 30 June 2019 and 2018:

Six months ended 30 June % of % of external external 2019 revenue 2018 revenue Change (RUB millions, except as stated) Total Segment Revenue ...... 80,333 79,584 0.9% External Revenue ...... 79,049 78,151 1.1% Elastomers ...... 28,987 36.7% 25,986 33.3% 11.5% Plastics and organic synthesis products ...... 27,486 34.8% 27,227 34.8% 1.0% Intermediates and other chemicals ...... 11,093 14.0% 11,262 14.4% (1.5%) MTBE and fuel additives ...... 10,869 13.7% 13,091 16.8% (17.0%) Other sales ...... 614 0.8% 585 0.7% 5.0% EBITDA(1) ...... 10,774 15,984 (32.6%) EBITDA margin(1) ...... 13.4% 20.1% Adjusted EBITDA(1) ...... 10,681 15,873 (32.7%) ______Note: (1) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures".

External Revenue

In the first half of 2019, the Group's Plastics, Elastomers and Intermediates external revenue increased by 1.1% to RUB 79,049 million from RUB 78,151 million in the first half of 2018. International benchmarks for most of the products in the Plastics, Elastomers and Intermediates segment decreased but this was partly offset by the Rouble depreciation. Increase in elastomers revenue by 11.5% was a result of higher selling prices and sales volumes. Plastics and organic synthesis products revenue was almost flat due to lower sales volumes of PET and alcohols affected by maintenance shutdowns, which were compensated by higher sales of MEG and the launch of production of a new type of plasticiser, dioctyl terephthalate ("DOTP"), since March 2019. The decrease in MTBE sales volumes was due to lower purchases from third parties under trading arrangements.

EBITDA

In the first half of 2019, the Group's Plastics, Elastomers and Intermediates EBITDA decreased by 32.6% to RUB 10,774 million from RUB 15,984 million in the first half of 2018, primarily due to an increase in feedstock prices (mainly purchases of PTA from third parties during the maintenance shutdown at the Group's production site in Blagoveshensk (see "Business — Capital Expenditure — Pure terephthalic acid (PTA) production upgrade at Polief")), as well as an increase in fixed costs, such as energy and staff costs, as this segment operates more labour and energy intensive assets.

In the first half of 2019, the segment EBITDA margin decreased to 13.4% from 20.1% in the first half of 2018. A decrease in EBITDA margin was largely attributable to higher feedstock prices.

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Midstream Segment

The following table sets forth a selected financial data of the Midstream segment for the six months ended 30 June 2019 and 2018:

Six months ended 30 June % of % of external external 2019 revenue 2018 revenue Change (RUB millions, except as stated) Total Segment Revenue ...... 134,706 130,438 3.3% External Revenue ...... 114,706 106,526 7.7% LPG ...... 69,725 60.8% 67,789 63.6% 2.9% Natural gas ...... 24,724 21.6% 23,528 22.1% 5.1% Naphtha ...... 19,120 16.7% 14,185 13.3% 34.8% Other sales ...... 1,137 1.0% 1,024 1.0% 11.0% EBITDA(1) ...... 56,232 55,138 2.0% EBITDA margin(1) ...... 41.7% 42.3% Adjusted EBITDA(1) ...... 56,543 55,472 1.9% ______Note: (1) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures".

External Revenue

In the first half of 2019, the Group's Midstream segment's external revenue increased by 7.7% to RUB 114,706 million from RUB 106,526 million in the first half of 2018 due to higher sales volumes of naphtha and LPG. Sales volumes of naphtha increased as the Group redirected internally produced naphtha to external sales and used purchased naphtha at the Group's crackers to take advantage of logistic savings. Increase in LPG sales volumes was due to its lower internal use following a shift towards a higher share of internal naphtha consumption.

EBITDA

In the first half of 2019, the Group's Midstream segment's EBITDA increased by 2.0% to RUB 56,232 million from RUB 55,138 million in the first half of 2018 primarily due to (i) the growth of naphtha and LPG sales volumes, (ii) the Group's adoption of IFRS 16 starting from 1 January 2019 (see "— Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16"), as well as (iii) lower purchase prices for the Group's liquid hydrocarbon feedstock. These factors were particularly offset by a decline in selling prices.

In the first half of 2019, the segment EBITDA margin decreased to 41.7% from 42.3% in the first half of 2018.

Operating expenses

The following table sets forth the Group's operating expenses for the six months ended 30 June 2019 and 2018:

Six months ended 30 June % of % of 2019(1) revenue 2018 revenue Change (RUB millions, except as stated)

Feedstock and materials ...... 62,841 23.6% 55,989 21.7% 12.2% Transportation and logistics ...... 39,718 14.9% 35,354 13.7% 12.3% - 92-

Six months ended 30 June % of % of 2019(1) revenue 2018 revenue Change (RUB millions, except as stated) Staff costs ...... 24,490 9.2% 22,273 8.6% 10.0% Energy and utilities ...... 21,424 8.0% 19,696 7.6% 8.8% Depreciation and amortisation ...... 19,273 7.2% 17,595 6.8% 9.5% Services provided by third parties ...... 12,661 4.8% 12,508 4.9% 1.2% Goods for resale ...... 11,120 4.2% 14,490 5.6% (23.3%) Repairs and maintenance ...... 3,801 1.4% 5,702 2.2% (33.3%) Processing services of third parties ...... 1,897 0.7% 1,877 0.7% 1.1% Taxes other than income tax ...... 1,550 0.6% 1,989 0.8% (22.1%) Marketing and advertising ...... 717 0.3% 597 0.2% 20.1% Charity and sponsorship ...... 318 0.1% 411 0.2% (22.6%) Rent expenses ...... 139 0.1% 775 0.3% (82.1%) Impairment/(reversal of impairment) of property, plant and equipment ...... 112 — (17) — — (Gain)/loss on disposal of property, plant and equipment ...... (39) — 131 0.1% — Change in WIP and refined products balances... (1,169) (0.4%) (4,445) (1.7%) (73.7%) Other ...... 695 0.2% 1,159 0.5% (40.0%) Operating expenses ...... 199,548 74.9% 186,084 72.2% 7.2% ______Note: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

In the first half of 2019, the Group's operating expenses increased by 7.2% to RUB 199,548 million from RUB 186,084 million in the first half of 2018, mainly as a result of a 12.2% increase in feedstock and materials costs, a 12.3% increase in transportation and logistics costs, a 10.0% increase in staff costs, a 8.8% increase in energy and utility costs and a 9.5% increase in depreciation and amortisation expenses; this was partially offset by a decrease in costs relating to goods for resales and repairs and maintenance costs.

In the first half of 2019, the Group recorded a reversal to its operating expenses in the amount of RUB 1,169 million as compared to a reversal in the amount of RUB 4,445 million in the first half of 2018, which was mainly attributable to the decrease in elastomers and LPG export volumes in the transit and utilisation of refined products accumulated earlier pending maintenance shutdown as part of an expansion project.

Feedstock and materials

In the first half of 2019, the Group's feedstock and materials costs increased by 12.2% to RUB 62,841 million from RUB 55,989 million in the first half of 2018. The increase was largely driven by (i) higher volumes of purchased naphtha compensated by lower netback prices, (ii) an increase in APG purchases on higher volumes and purchasing prices, and (iii) an increase in external purchases of PTA during a maintenance shutdown at the Group's production site in Blagoveshensk as part of the PTA capacity expansion project (for further details on this project, see "Business — Capital Expenditure — Pure terephthalic acid (PTA) production upgrade at Polief").

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The following table presents information on costs related to purchasing of feedstock and materials for the six months ended 30 June 2019 and 2018:

Six months ended 30 June % of % of feedstock feedstock and and materials materials 2019 expense 2018 expense Change (RUB millions, except as stated)

NGLs ...... 29,574 47.1% 26,589 47.5% 11.2% APG ...... 14,639 23.3% 13,704 24.5% 6.8% Paraxylene ...... 2,950 4.7% 3,686 6.6% (20.0%) Benzene ...... 1,836 2.9% 2,242 4.0% (18.1%) Change of stock ...... (2,740) (4.4%) (3,465) (6.2%) (20.9%) Other feedstock and materials ...... 16,582 26.4% 13,233 23.6% 25.3% Feedstock and materials, total ...... 62,841 100.0% 55,989 100.0% 12.2%

Transportation and logistics

In the first half of 2019, the Group's transportation and logistics costs increased by 12.3% to RUB 39,718 million from RUB 35,354 million in the first half of 2018. Such increase was mainly due to the transfer of in-house transportation services to PTC, a JV between SIBUR and SG-Trans. As a result, all logistic expenses related to railcar transportation have been treated as external starting from the fourth quarter of 2018. Additional factors for the increase in transportation and logistics costs include indexation of the Railway Tariffs (see "— Significant Factors Affecting the Group's Results of Operations — Railway Transportation Tariffs"), higher transported volumes and the Rouble depreciation partially offset by application of IFRS 16 for lease contracts of shipping vessels effective from 1 January 2019 (see "— Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16").

Staff costs

In the first half of 2019, the Group's staff costs increased by 10.0% to RUB 24,490 million from RUB 22,273 million in the first half of 2019 due to (i) the growth in headcount of NIPIGAS as a result of the expansion of its projects portfolio, (ii) an increase in average salaries reflecting indexation in the mid-2018, and (iii) increase in staff bonuses for the higher results of performance contracts in 2018, including production volumes, EBITDA, LTIF and others.

Depreciation and amortisation

In the first half of 2019, the Group's depreciation and amortisation expenses increased by 9.5% to RUB 19,273 million from RUB 17,595 million due to right-of-use assets depreciation under IFRS 16 (see "— Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16"), slightly offset by lower expenses following the sale of the Group's LPG tank fleet to PTC in October 2018.

Energy and utilities

In the first half of 2019, the Group's energy and utilities expenses increased by 8.8% to RUB 21,424 million from RUB 19,696 million in the first half of 2018 largely due to higher electricity tariffs to compensate for capital expenditures of generating companies under the CDA (Capacity Delivery Agreement) modernisation programme.

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The following table presents data on the Group's energy and utilities costs for the six months ended 30 June 2018 and 2017:

Six months ended 30 June % of total % of total energy and energy and utilities utilities 2019 expense 2018 expense Change (RUB millions, except as stated)

Electricity ...... 13,281 62.0% 11,483 58.3% 15.7% Fuel (primarily natural gaz) ...... 4,397 20.5% 4,418 22.4% (0.5%) Heat ...... 2,550 11.9% 2,661 13.5% (4.2%) Other ...... 1,196 5.6% 1,134 5.8% 5.5% Energy and utilities, total ...... 21,424 100.0% 19,696 100.0% 8.8%

Goods for resale

In the first half of 2019, the Group's expenses related to purchase of goods for resale decreased by 23.3% to RUB 11,120 million from RUB 14,490 million in the first half of 2018 due to lower volumes of MTBE that the Group previously purchased to resell on export markets as its counterparty developed its own marketing expertise. Reduced procurement volumes due to the completion of one of the NIPIGAS projects also contributed to decreases in the Group's expenses related to purchase of goods for resale.

Repairs and maintenance

In the first half of 2019, the Group's repair and maintenance costs decreased by 33.3% to RUB 3,801 million from RUB 5,702 million in the first half of 2018 due to the sale of its own LPG tank fleet to PTC in October 2018, the transition to an extended overhaul period at certain production sites starting from 2019 and lengthy maintenance shutdowns in the first half of 2018.

Operating profit

In the first half of 2019, the Group's operating profit decreased by 6.8% to RUB 66,731 million from RUB 71,610 million in the first half of 2018 due to a 7.2% increase in the Group's operating expenses. The corresponding operating margin was 25.1% and 27.8% in the first half of 2019 and 2018, respectively.

Net finance income and expense

In the first half of 2019, the Group reported net finance income in the amount of RUB 26,349 million as compared to net finance expense in the amount of RUB 13,750 million in the first half of 2018. This was primarily due to a foreign exchange gain recorded in the first half of 2019 as a result of the appreciation of the Rouble during the period and the resulting revaluation of the Group's foreign currency denominated liabilities, as compared to a foreign exchange loss recorded in the first half of 2018 due to the Rouble depreciation during that period.

The following table presents data on the Group's net finance income and expense for the six months ended 30 June 2019 and 2018:

Six months ended 30 June 2019(1) 2018 Change (RUB millions, except as stated)

Interest income ...... 478 615 (22.3%) - 95-

Six months ended 30 June 2019(1) 2018 Change (RUB millions, except as stated) Interest expense ...... (1,717) (494) >100% Foreign exchange gain/(loss) ...... 28,269 (13,379) >100% Other finance expense...... (681) (492) 38.4% Net finance income/(expense) ...... 26,349 (13,750) >100% ______Note: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

Share of net income of joint ventures and associates

In the first half of 2019, the Group reported net income of joint ventures and associates in the amount of RUB 3,723 million as compared to RUB 1,462 million in the first half of 2018. This was mainly attributable to growth in RusVinyl revenue on higher volumes and average selling prices.

Income tax expense

In the first half of 2019, the Group's income tax expense increased by 42.7% to RUB 19,195 million from RUB 13,454 million in the first half of 2018 mainly due to higher pre-tax profit in the first half of 2019 as compared to the first half of 2018.

Profit for the period

In the first half of 2019, the Group's profit increased by 69.2% to RUB 77,608 million from RUB 45,868 million in the first half of 2018 mainly due to the factors described above. The Group's net margin amounted to 29.1% and 17.8% in the first half of 2019 and 2018, respectively. In the first half of 2019, profit attributable to shareholders of the Group increased by 72.9% to RUB 76,201 million from RUB 44,069 million in the first half of 2018.

EBITDA

In the first half of 2019, the Group's EBITDA decreased by 3.4% to RUB 86,116 million from RUB 89,188 million in the first half of 2018 due to a 32.6% decrease in Plastics, Elastomers and Intermediates EBITDA as a result of higher volumes of externally purchased feedstock (mainly purchases of PTA from third parties during the maintenance shutdown as part of the expansion project at the Group's production site in Blagoveshensk (see "Business — Capital Expenditure — Pure terephthalic acid (PTA) production upgrade at Polief")) and growth in fixed costs, as well as a decline in EBITDA from the Unallocated category. The decrease in Unallocated EBITDA was mainly attributable to a downward revision of NIPIGAS revenues caused by the budget update of one of the project management contracts and the transfer of in-house transportation services to PTC, a JV with SG-Trans. These factors were partially compensated by higher EBITDA of the Olefins and Polyolefins segment supported by lower feedstock purchase prices and change in the sales structure. Midstream segment EBITDA benefited mostly from higher sales volumes.

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Results of Operations for the Years Ended 31 December 2018, 2017 and 2016

The following table sets forth the Group's consolidated selected profit or loss data and selected non-IFRS measures for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December % of Change % of Change % of 2018 revenue 2018/2017 2017 revenue 2017/2016 2016 revenue (RUB millions, except as stated) Revenue ...... 568,647 100.0% 25.1% 454,619 100.0% 10.4% 411,812 100% Olefins and Polyolefins Segment ...... 100,862 17.7% 14.4% 88,135 19.4% 1.5% 86,830 21.1% Plastics, Elastomers and Intermediates Segment ...... 171,003 30.1% 16.4% 146,877 32.3% 12.4% 130,690 31.7% Midstream Segment ...... 240,818 42.3% 30.7% 184,199 40.5% 7.9% 170,708 41.5% Unallocated ...... 55,964 9.8% 58.1% 35,408 7.8% 50.1% 23,584 5.7% incl. Revenue from Project Management and Construction Services ...... 41,047 7.2% 91.3% 21,460 4.7% 90.0% 11,295 2.7% Operating expenses ...... (403,566) (71.0%) 22.4% (329,598) (72.5%) 6.8% (308,681) (75.0%) Operating profit ...... 165,081 29.0% 32.0% 125,021 27.5% 21.2% 103,131 25.0% Net finance (expense) / income ...... (29,359) (5.2%) — 3,983 0.9% (87.3%) 31,284 7.6% Result of subsidiary's disposal and remeasurement of related assets ...... (425) (0.1%) — 19,805 4.4% — — — Result of subsidiary's acquisition and remeasurement of related liabilities ...... (217) — (77.5%) (965) (0.2%) — 1,666 0.4% Share of net income of joint ventures and associates .... 3,173 0.6% 53.1% 2,073 0.5% (68.0%) 6,471 1.6% Profit before income tax...... 138,253 24.3% (7.8%) 149,917 33.0% 5.2% 142,552 34.6% Income tax expense ...... (27,493) (4.8%) (7.3%) (29,671) (6.5%) 0.7% (29,463) (7.2%) Profit for the year, including attributable to: ...... 110,760 19.5% (7.9%) 120,246 26.4% 6.3% 113,089 27.5% Non-controlling interest ...... 4,431 0.8% 32.8% 3,337 0.7% 71.1% 1,950 0.5% Shareholders of the parent company ...... 106,329 18.7% (9.0%) 116,909 25.7% 5.2% 111,139 27.0%

Non-IFRS measures Adjusted EBITDA(1) ...... 205,529 24.6% 164,964 12.8% 146,221 EBITDA(1) ...... 201,007 25.0% 160,851 15.2% 139,629 EBITDA Margin(1) ...... 35.3% 35.4% 33.9% EBITDA(1) of reportable segments: Olefins and Polyolefins ...... 37,679 (15.6%) 44,636 (8.7%) 48,909 Plastics, Elastomers and Intermediaries ...... 34,816 5.4% 33,037 4.9% 31,508 Midstream ...... 127,107 46.7% 86,672 43.2% 60,526 ______Note: (1) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures".

Revenue

In 2018, the Group's revenue increased by 25.1% year-on-year to RUB 568,647 million from RUB 454,619 million in 2017 with growth in revenues from LPG, naphtha, PP and plastics and organic synthesis products driven by positive market prices dynamics and higher sales volumes, marginally offset by a slight decline in PE sales. In particular:

• Olefins and Polyolefins segment revenue increased by 14.4% to RUB 100,862 million in 2018 from RUB 88,135 million in 2017, mainly due to the higher revenue from PP;

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• Plastics, Elastomers and Intermediates segment revenue increased by 16.4% to RUB 171,003 million in 2018 from RUB 146,877 million in 2017, largely due to price increases for the plastics and organic synthesis products and MTBE;

• Midstream segment revenue increased by 30.7% to RUB 240,818 million in 2018 from RUB 184,199 million in 2017, largely due to higher LPG and naphtha prices;

• Unallocated category revenue increased by 58.1% to RUB 55,964 million in 2018 from RUB 35,408 million in 2017, which was mainly driven by higher revenue from NIPIGAS services.

In 2017, the Group's revenue increased by 10.4% year-on-year to RUB 454,619 million from RUB 411,812 million in 2016 on positive dynamics in LPG and elastomers, with the following dynamics across the segments:

• Olefins and Polyolefins segment revenue increased by 1.5% to RUB 88,135 million in 2017 from RUB 86,830 million in 2016, mainly due to higher production in Tobolsk and Tomsk, while relatively positive dynamics in international polyolefin prices were fully offset by the appreciation of the Rouble;

• Plastics, Elastomers and Intermediates segment revenue increased by 12.4% to RUB 146,877 million in 2017 from RUB 130,690 million in 2016, mainly due to higher revenue from elastomer sales in a favourable pricing environment, as well as higher revenue from sales of intermediates;

• Midstream segment revenue increased by 7.9% to RUB 184,199 million in 2017 from RUB 170,708 million in 2016, largely due to higher LPG prices;

• Unallocated category revenue increased by 50.1% to RUB 35,408 million in 2017 from RUB 23,584 million in 2016, which was driven by higher revenue from NIPIGAS services, as well as higher revenue from power and electricity sales following the acquisition of Tobolsk HPP in February 2016.

The following table sets forth the breakdown of revenues by geographical regions for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December % of Change % of Change % of 2018 revenue 2018/2017 2017 revenue 2017/2016 2016 revenue (RUB millions, except as stated) Russia ...... 333,394 58.6% 26.8% 262,862 57.8% 10.5% 237,843 57.8% Europe ...... 179,196 31.5% 31.8% 135,989 29.9% 15.6% 117,680 28.6% Asia ...... 26,082 4.6% (10.7%) 29,193 6.3% 3.7% 28,146 6.8% CIS ...... 25,661 4.5% 7.4% 23,888 5.3% 6.4% 22,462 5.5% Other ...... 4,314 0.8% 60.6% 2,687 0.6% (52.7%) 5,681 1.4% Revenue ...... 568,647 100.0% 25.1% 454,619 100.0% 10.4% 411,812 100%

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Olefins and Polyolefins Segment

The following table sets forth a selected financial data of the Olefins and Polyolefins segment for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December % of % of % of external Change external Change external 2018 revenue 2018/2017 2017 revenue 2017/2016 2016 revenue (RUB millions, except as stated) Total Segment Revenue ...... 130,899 15.9% 112,910 5.1% 107,426 External Revenue ...... 100,862 14.4% 88,135 1.5% 86,830 PP ...... 48,417 48.0% 14.3% 42,368 48.1% 7.8% 39,302 45.3% PE (LDPE) ...... 20,496 20.3% (3.4)% 21,208 24.1% 1.4% 20,923 24.1% BOPP-films ...... 18,471 18.3% 11.0% 16,642 18.9% (10.1%) 18,509 21.3% Ethylene ...... 7,726 7.7% 33.0% 5,810 6.6% 14.6% 5,072 5.8% Other polymer products...... 4,930 4.9% 247.7% 1,418 1.6% (39.5%) 2,344 2.7% Other sales ...... 822 0.8% 19.3% 689 0.8% 1.3% 680 0.8% EBITDA(1) ...... 37,679 (15.6%) 44,636 (8.7%) 48,909 EBITDA margin(1)...... 28.8% 39.5% 45.5% including EBITDA of PP production in Tobolsk ...... 16,437 (17.7%) 19,981 (12.0%) 22,707 EBITDA margin of PP production in Tobolsk ...... 46.0% 55.3% 70.3% JV contribution (the Group's portion of EBITDA of joint ventures and associates) ...... 8,828 23.4% 7,154 (19.1%) 8,843 Adjusted EBITDA(1) ...... 46,507 (10.2)% 51,790 (10.3%) 57,752 ______Note: (1) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures".

External Revenue

In 2018, the Group's Olefins and Polyolefins segment external revenue increased by 14.4% to RUB 100,862 million from RUB 88,135 million in 2017. The increase was mainly due to positive dynamics in PP, as well as ethylene and BOPP-films, partly offset by the decrease in revenue from LDPE sales.

In 2017, the Group's Olefins and Polyolefins segment external revenue increased by 1.5% to RUB 88,135 million from RUB 86,830 million in 2016. The increase was attributable to strong PP and LDPE production growth as a result of a year-on-year increase in the average capacity utilisation rates, which was substantially offset by the decrease in revenue from BOPP-films on both lower effective average selling prices and sales volumes.

Polypropylene (PP)

In 2018, the Group's revenue from sales of PP increased by 14.3% to RUB 48,417 million from RUB 42,368 million in 2017, which, in turn, represented a 7.8% increase as compared to RUB 39,302 million in 2016.

In 2018, the increase was driven by a 17.2% increase in the effective average selling price despite a 2.5% decrease in sales volumes. PP benefited from favourable pricing environment driven by higher oil prices, a tighter PP market in China due to an import ban on plastic waste and deficit of propylene on the European market. Domestic prices partially followed an upturn in international benchmarks, though the Group was not able to fully pass the price uplift on to domestic processors. A decrease in sales volumes was driven by lower PP production in Tobolsk due to a lengthy

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maintenance shutdown in the second half of 2018. In 2018, domestic sales accounted for 65.8% of total PP revenue, while 34.2% was attributable to export sales.

In 2017, the increase was driven by a 10.9% increase in sales volumes despite a 2.8% decrease in the effective average selling price. The Group's PP sales volumes growth was primarily attributable to: (i) a 10.0% increase in production due to an increase in capacity utilisation rate at the Group's PP production site in Tobolsk to 102% in 2017 from 93% in 2016, when the site had lengthy maintenance shutdowns, see "Business — Overview of Business Segments — Olefins and Polyolefins Segment — Production Sites"; (ii) lower volumes used internally following the divestment of a geosynthetics business that consumed PP as feedstock; and (iii) lower inventory accumulation as compared to 2016 when the Group increased stock pending lengthy maintenance shutdowns discussed above. This was partially offset by lower third-party purchases from NPP Neftekhimia JV resulting from a maintenance shutdown at this production site in the first half of 2017. The Group's effective selling prices for PP decreased as higher international market prices were negatively affected by appreciation of the Rouble. In 2017, domestic sales accounted for 60.8% of total PP revenue, while 39.2% was attributable to export sales.

Polyethylene (PE) (LDPE)

In 2018, the Group's revenue from sales of PE decreased by 3.4% to RUB 20,496 million from RUB 21,208 million in 2017, following an increase of 1.4% in 2017 as compared to RUB 20,923 million in 2016.

In 2018, the decrease was driven by a 2.3% decrease in sales volumes and a 1.1% decrease in the effective average selling price. PE markets were under pressure following global capacity additions and increased competition on the domestic market. The Group's sales volumes decreased on lower production driven by scheduled maintenance shutdown of its production site in Tomsk. The Group channelled higher PE volumes to export markets where it observed improved market conditions. In 2018, the Group's domestic sales accounted for 64.0% of total PE revenue, and 36.0% was attributable to export sales.

In 2017, the increase was driven by a 12.8% increase in sales volumes, despite a 10.2% decrease in the effective average selling price. The increase in PE sales volumes was attributable to a 10.9% growth in production volumes following the completion of a capacity expansion investment project at the Group's production site in Tomsk (an increase in the annual nameplate production capacity to 270,000 tonnes from 245,000 tonnes). This was supported by additional purchases from third parties to meet contractual obligations during maintenance shutdowns at the end of 2017. The decrease in the effective average selling price for PE, despite higher international market prices, was mainly attributable to appreciation of the Rouble and higher competition on the domestic market. In 2017, the share of domestic sales decreased to 66.6% of total PE revenue from 76.9% in 2016, while 33.4% and 23.1% was attributable to export sales in 2017 and 2016, respectively. This was a result of increased competition on the domestic market and redirection of additional volumes to the export markets.

BOPP-films

In 2018, the Group's revenue from BOPP-film sales increased by 11.0% to RUB 18,471 million from RUB 16,642 million in 2017, which, in turn, represented a 10.1% decrease as compared to RUB 18,509 million in 2016.

In 2018, the increase was driven by a 13.8% increase in the effective average selling price despite a 2.5% decrease in sales volumes. The increase in the effective average selling price partially followed positive dynamics of international market prices. Lower sales volumes were attributable - 100-

to a slight decline in production and moderate inventories accumulation as compared to inventory sales in the respective period of 2017. In 2018, domestic sales accounted for 67.1% of total BOPP- film revenue, while 32.9% was attributable to export sales.

BOPP-films revenue decreased in 2017 resulting from an 8.3% decrease in the effective average selling price and a 2.0% decline in sales volumes. The decrease in the effective average selling price was largely attributable to the Rouble appreciation, lower spreads between BOPP-films and PP that drive export prices, and a higher share of contract sales. Lower sales volumes were largely attributable to a 2.8% decline in production. In 2017, domestic sales accounted for 70.8% of total BOPP-film revenue, while 29.2% was attributable to export sales.

Ethylene

In 2018, the Group's external revenue from olefins sales represented by ethylene increased by 33.0% to RUB 7,726 million from RUB 5,810 million in 2017, following an increase of 14.6% from RUB 5,072 million in 2016.

The increase in 2018 was largely attributable to a 25.3% growth in the effective average selling price, which reflected higher LPG and naphtha prices that drive the Group's selling price. Sales volumes increased by 6.2%, which was attributable to increased capacity utilisation at JV RusVinyl, which is the Group's key customer for ethylene.

The increase in 2017 was largely attributable to an 11.6% increase in the effective average selling price and a 2.6% increase in sales volumes. An increase in the effective average selling price reflected higher LPG and naphtha prices that drive the Group's selling price to RusVinyl, while sales growth was attributable to higher capacity utilisation at the Group's production site in Kstovo.

The Group sells 100% of its ethylene in Russia.

EBITDA

In 2018, EBITDA of the Group's Olefins and Polyolefins decreased by 15.6% year-on-year to RUB 37,679 million from RUB 44,636 million in 2017, primarily due to (i) weaker spreads for PE resulting from the growth in oil derivatives prices outpacing those of polyolefin benchmarks, as well as (ii) lower PP production volumes due to maintenance shutdowns at the Group's major production sites (for further details, see "Business — Overview of Business Segments — Olefins and Polyolefins Segment — Production Sites").

In 2018, the segment EBITDA margin was 28.8%, a year-on-year decrease from 39.5% in 2017. The decrease in margin was driven by increased prices for feedstock and lower PP and PE sales volumes.

In 2018, the Group's share in EBITDA of joint ventures and associates increased by RUB 1,674 million due to the positive contribution of all the Group's JVs, mainly NPP Neftekhimia where a lengthy maintenance shutdown of a two-year cycle fell on 2017.

In 2017, the Group's Olefins and Polyolefins EBITDA decreased by 8.7% year-on-year to RUB 44,636 million from RUB 48,909 million in 2016, primarily as a result of flat spreads and the Rouble appreciation. Feedstock costs increased, driven by higher netbacks for liquids following the increase in international benchmarks that outpaced the dynamics of market prices for polyolefins. This was partially compensated by higher sales volumes of PP and PE attributable to increased average capacity utilisation rates at the Group's production sites in Tobolsk and Tomsk (for further details, see "Business — Overview of Business Segments — Olefins and Polyolefins Segment — Production Sites"). - 101-

In 2017, the segment EBITDA margin was 39.5%, a year-on-year decrease from 45.5% in 2016. The decrease in margin was a result of tighter polyolefin spreads resulting from appreciation of the Rouble.

In 2017, the segment adjusted EBITDA decreased by 10.3% to RUB 51,790 million reflecting negative dynamics in the segment's EBITDA, as well as the decrease in the JV EBITDA, primarily as a result of tighter spreads in rouble terms coupled with a lengthy maintenance shutdown at NPP Neftekhimia production (JV with Gazprom Neft).

Plastics, Elastomers and Intermediates Segment

The following table sets forth a selected financial data of the Plastics, Elastomers and Intermediates segment for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December % of % of % of external Change external Change external 2018 revenue 2018/2017 2017 revenue 2017/2016 2016 revenue (RUB millions, except as stated) Total Segment Revenue ...... 174,006 16.2% 149,710 13.1% 132,379 External Revenue ...... 171,003 16.4% 146,877 12.4% 130,690 Plastics and organic synthesis products ...... 59,878 35.0% 26.8% 47,227 32.2% 2.8% 45,929 35.1% Elastomers ...... 55,021 32.2% 6.1% 51,857 35.3% 31.5% 39,421 30.2% MTBE and fuel additives .... 29,753 17.4% 28.7% 23,120 15.7% (0.4%) 23,213 17.8% Intermediates and other chemicals ...... 25,137 14.7% 7.4% 23,410 15.9% 14.0% 20,539 15.7% Other sales ...... 1,214 0.7% (3.9%) 1,263 0.9% (20.5%) 1,588 1.2% EBITDA(1) ...... 34,816 5.4% 33,037 4.9% 31,508 EBITDA Margin(1) ...... 20.0% 22.1% 23.8% Adjusted EBITDA(1) ...... 34,611 5.1% 32,938 4.8% 31,441 ______Note: (1) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures".

External Revenue

In 2018, the Group's Plastics, Elastomers and Intermediates segment external revenue increased by 16.4% to RUB 171,003 million from RUB 146,877 million in 2017. The increase was mainly attributable to higher revenue from plastics and organic synthesis products, as well as MTBE, largely on positive dynamics in international benchmarks.

In 2017, the Group's Plastics, Elastomers and Intermediates segment external revenue increased by 12.4% to RUB 146,877 million from RUB 130,690 million in 2016. The increase was mainly driven by elastomers performance, where commodity rubbers made the largest contribution, and by higher revenue from intermediates. There were no other significant revenue shifts across the segment.

Plastics and organic synthesis products

In 2018, the Group's revenue from sales of plastics and organic synthesis products increased by 26.8% to RUB 59,878 million from RUB 47,227 million in 2017, while in 2017 revenue increased by 2.8% compared to RUB 45,929 million in 2016.

The growth in revenue in 2018 was a result of a 22.3% increase in the effective average selling price and a 3.7% increase in sales volumes. The increase in the effective average selling prices was attributable to the overall positive price dynamics across the product group mainly following growth in international benchmarks, with the most significant impact in PET. The increase in sales - 102-

volumes was attributable to higher alcohols production due to a two-year maintenance cycle at the Group's production site in Perm, accompanied by higher glycols output due to increased productivity and the start of production of new type of polystyrene (MIX polystyrene) since June 2018. In 2018, domestic sales accounted for 77.0% of total plastics and organic synthesis products revenue, while 23.0% was attributable to export sales.

The growth in revenue in 2017 was a result of a 3.5% increase in the effective average selling price and relatively flat sales volumes compared with the prior year. The Group observed mixed price dynamics across different product groups, which counterbalanced one another and the average growth in international market prices was largely offset by appreciation of the Rouble. The Group's sales volumes were relatively flat, due to lower alcohols production, partially compensated by higher PET production due to biennial maintenance schedules at the Group's production sites, and the growth of the Group's glycols production due to higher internal ethylene supplies from the Olefins and Polyolefins segment (see "Business — Overview of Business Segments — Olefins and Polyolefins Segment"). In 2017, domestic sales accounted for 77.1% of total plastics and organic synthesis products revenue, while 22.9% was attributable to export sales.

Elastomers

In 2018, the Group's revenue from elastomers sales increased by 6.1% to RUB 55,021 million from RUB 51,857 million in 2017, following an increase of 31.5% in 2017 as compared to RUB 39,421 million in 2016.

The increase in 2018 was a result of a 5.9% increase in the effective average selling price mainly driven by positive dynamics in international benchmarks. Sales volumes were almost flat. In 2018, export sales accounted for 63.5% of total elastomers revenue, and 36.5% was attributable to domestic sales.

The increase in 2017 was largely due to a 20.0% increase in the Group's effective average selling price, as well as a 9.7% increase in sales volumes. The increase in the Group's effective average selling price was mainly driven by (i) commodity rubbers, where a favourable market environment in Asian markets mainly in the first half of 2017 was reflected in higher international benchmarks, and (ii) TPE in Europe following improved quality of the Group's products. The positive dynamics were partly offset by appreciation of the Rouble. The Group increased operating rates to capture positive dynamics in its target product markets. In 2017, export sales accounted for 63.6% of total elastomers revenue, while 36.4% was attributable to domestic sales.

MTBE and fuel additives

In 2018, the Group's revenue from MTBE and fuel additives sales increased by 28.7% to RUB 29,753 million from RUB 23,120 million in 2017, while in 2017 attributable revenue remained almost flat as compared to RUB 23,213 million in 2016.

The increase in 2018 was largely due to a 27.1% increase in the effective average selling price and a 1.3% increase in sales volumes. The increase in the effective average selling price was mainly driven by higher international benchmarks. Following the divestment of Uralorgsintez in April 2017, the Group decreased MTBE production volumes and increased the sales of MTBE under trading arrangements. The sales mix changed towards a higher share of domestic sales primarily as a result of more favourable pricing terms in new contracts with the Group's customers in Russia. In 2018, the Group's share of domestic sales increased to 72.0% of total MTBE and fuel additives revenue from 43.5% in 2017, while 28.0% and 56.5% were derived from export sales in 2018 and 2017, respectively.

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In 2017, following the divestment of Uralorgsintez in April 2017, the Group decreased MTBE production volumes and increased export sales of MTBE under its long-term trading arrangement. The Group also increased external sales of fuels and fuel additives that were sold internally before the divestment. As a result, the Group's sales volumes in this product group were flat. The Group's average selling prices did not move year-on-year. In 2017, the Group's share of domestic sales decreased to 43.5% of total MTBE and fuel additives revenue from 57.3% in 2016, while 56.5% and 42.7% were derived from export sales in 2017 and 2016, respectively.

Intermediates and other chemicals

In 2018, the Group's revenue from sales of intermediates and other chemicals increased by 7.4% to RUB 25,137 million from RUB 23,410 million in 2017. In 2017, the respective revenues increased by 14.0% from RUB 20,539 million in 2016.

The increase in 2018 was largely attributable to higher international market prices. This was partially offset by lower revenue from propylene sales due to scheduled maintenance shutdowns at the Group's production sites in Tobolsk and Kstovo, when some propylene volumes were rerouted from external sales to internal use in Tobolsk PP Plant. In 2018, the share of domestic sales increased to 82.7% of total intermediates and other chemicals revenue, from 78.2% in 2017, while 17.3% and 21.8% were derived from export sales in 2018 and 2017, respectively.

The increase in 2017 was largely attributable to (i) higher revenue from propylene due to higher production following the replacement of raw NGL with LPG and naphtha feedstock at the Group's crackers, and (ii) higher revenue from benzene, largely due to lower internal use and the resulting higher external sales during the maintenance shutdown in Perm in August 2017.

EBITDA

In 2018, the Plastics, Elastomers and Intermediates EBITDA increased by 5.4% to RUB 34,816 million from RUB 33,037 million in 2017 primarily due to increased plastics and organic synthesis products selling prices, partially offset by weaker elastomers spread. In 2018, the Plastics, Elastomers and Intermediates Adjusted EBITDA was RUB 34,611 million compared to RUB 32,938 million in 2017.

In 2018, the segment's EBITDA margin was 20.0%, a year-on-year decrease from 22.1% in 2017. The lower margin was largely attributable to higher prices for hydrocarbon feedstock primarily supplied internally from the Midstream segment.

In 2017, the Plastics, Elastomers and Intermediates EBITDA increased by 4.9% to RUB 33,037 million from RUB 31,508 million in 2016, primarily due to reclassification of the butane- butadiene processing stage from the Midstream segment to the Plastics, Elastomers and Intermediates segment starting from 2018 (numbers for the year 2017 were adjusted accordingly). In 2017, the Plastics, Elastomers and Intermediates Adjusted EBITDA was RUB 32,938 million compared to RUB 31,441 million in 2016.

In 2017, the segment's EBITDA margin was 22.1%, a year-on-year decrease from 23.8% in 2016. The lower margin was largely attributable to tighter spreads, as well as higher trading volumes, primarily of MTBE and fuel additives.

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Midstream Segment

The following table sets forth a selected financial data of the Midstream segment for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December % of % of % of external Change external Change external 2018 revenue 2018/2017 2017 revenue 2017/2016 2016(2) revenue (RUB millions, except as stated) Total Segment Revenue ...... 294,790 31.9% 223,484 14.0% 196,025 External Revenue ...... 240,818 30.7% 184,199 7.9% 170,708 LPG ...... 152,206 63.2% 37.5% 110,708 60.1% 24.6% 88,839 52.0% Natural gas ...... 49,067 20.4% 3.4% 47,474 25.8% 3.3% 45,958 26.9% Naphtha ...... 37,572 15.6% 57.2% 23,904 13.0% (22.5%) 30,846 18.1% Other sales ...... 1,973 0.8% (6.6%) 2,113 1.1% (58.3%) 5,065 3.0% EBITDA(1) ...... 127,107 46.7% 86,672 43.2% 60,526 EBITDA Margin(1) ...... 43.1% 38.8% 31.0% Adjusted EBITDA(1) ...... 127,771 46.2% 87,415 42.8% 61,211 ______Notes: (1) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures". (2) Prior to 2018, Midstream segment was named "Feedstock and Energy".

External Revenue

In 2018, the Group's Midstream external revenue increased by 30.7% to RUB 240,818 million from RUB 184,199 million in 2017 due to higher selling prices for LPG and naphtha mainly following the positive dynamics in international benchmarks. This was supported by the growth in LPG sales volumes on higher raw NGL fractionation that was up by 2.5% year-on-year.

In 2017, the Group's Midstream external revenue increased by 7.9% to RUB 184,199 million from RUB 170,708 million in 2016 due to higher selling prices for NGLs following the positive dynamics of international market prices, partially compensated by the Rouble appreciation, as well as lower sales volumes of naphtha and raw NGL.

Liquefied Petroleum Gases (LPG)

In 2018, the Group's revenue from LPG sales increased by 37.5% year-on-year to RUB 152,206 million from RUB 110,708 million in 2017, which, in turn, increased by 24.6% as compared to RUB 88,839 million in 2016.

The revenue increase in 2018 was driven by a 26.4% increase in the effective average selling price and an 8.8% increase in sales volumes. The increase in the Group's effective average selling price was driven by positive dynamics in international market prices. The Group's external LPG sales volumes increased mainly due to: (i) lower internal use of LPG at the Group's crackers in Tomsk and Kstovo following a shift towards a higher share of naphtha feedstock, as well as a scheduled maintenance shutdown at the propane dehydrogenation ("PDH") facility of the Group in Tobolsk that is fed by propane, (ii) higher raw NGL fractionation volumes, and (iii) higher volumes of LPG purchased under trading arrangements.

In 2018, the Group's export sales accounted for 73.7% of total LPG revenue, while 26.3% was attributable to domestic sales.

The revenue increase in 2017 was driven by a 19.3% increase in the effective average selling price and a 4.5% increase in sales volumes. The increase in the Group's effective average selling price was driven by positive dynamics in international market prices partially offset by the appreciation

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of the Rouble. The Group's domestic selling prices increased at a slower pace compared to export prices due to the high base of 2016, when the Group observed growing demand domestically and changed certain sales contracts.

The Group's external LPG sales volumes increased, mainly due to the fractionation capacity expansion at the Group's production site in Tobolsk in the first half of 2016 and respectively shorter maintenance shutdown in 2017 compared to the year earlier. The fractionation capacity expansion resulted in the following year-on-year changes: (i) a 4.8% increase in the Group's LPG production volumes; (ii) higher processing volumes of raw NGL for NOVATEK, with the subsequent increase in LPG purchases for resale from this counterparty; (iii) an increase in LPG deliveries to the Group's cracker in Kstovo, as previously supplied raw NGL was utilised at the expanded fractionation capacity; and (iv) higher LPG consumption at PP production in Tobolsk. Overall, higher available volumes of LPG were primarily channelled to the Group's Olefins and Polyolefins business, while internal sales to the Plastic, Elastomers and Intermediates segment decreased due to Uralorgsintez divestment.

In 2017, the Group's domestic sales accounted for 26.1% of total LPG revenue, while 73.9% was attributable to export sales.

Natural Gas

In 2018, the Group's revenue from natural gas sales increased by 3.4% year-on-year to RUB 49,067 million from RUB 47,474 million in 2017, which, in turn, increased by 3.3% from RUB 45,958 million in 2016.

The increase in 2018 was driven by a 3.1% increase in the effective average selling price following regulated natural gas prices indexation. Sales volumes were almost flat due to stable volumes of processed APG.

The increase in 2017 was a result of a 2.0% increase in the effective average selling price and a 1.3% increase in sales volumes. The increase in the Group's effective average selling price was driven by the indexation of regulated natural gas prices of 3.9% as of 1 July 2017. The growth in natural gas sales volumes was attributable to a 1.5% growth in production due to higher volumes of APG processing from higher supplies from oil companies.

The Group sells 100% of its natural gas in Russia.

Naphtha

In 2018, the Group's revenue from naphtha sales increased by 57.2% year-on-year to RUB 37,572 million from RUB 23,904 million, which, in turn, decreased by 22.5% from RUB 30,846 million in 2016.

The increase in 2018 was driven by a 32.2% increase in the effective average selling price and a 18.9% increase in sales volumes. The increase in the Group's effective average selling price was driven by positive dynamics of international market prices. The Group's sales volumes increased as the Group used purchased naphtha at its crackers in Kstovo and Tomsk and redirected internally produced naphtha to external sales to optimise logistics. In 2018, the Group redistributed some of the sales volumes from the domestic market to export. The share of export sales increased to 75.3% of total naphtha revenue, from 66.4% in 2017, while 24.7% and 33.6%, respectively, were derived from domestic sales.

The 2017 decrease was mainly a result of a 32.4% decrease in sales volumes, despite a 14.6% increase in the effective average selling price. The decrease in sales volumes was largely - 106-

attributable to (i) an increase in naphtha supplies to the Group's crackers in Tomsk and Kstovo, as previously supplied raw NGL was utilised at the expanded fractionation capacity, and (ii) a decrease in naphtha resale due to termination of a temporary trading arrangement at the end of 2016. The increase in the Group's effective average selling price was driven by the positive dynamics of international market prices, lower export duties and favourable changes in the Group's contract terms with customers, partially compensated by the Rouble appreciation. In 2017, the Group's share of export sales decreased to 66.4% of total naphtha revenue from 82.8% in 2016, while 33.6% and 17.2%, respectively, was derived from domestic sales. The change in the sales mix was attributable to lower sales under trading arrangements.

EBITDA

In 2018, the Group's Midstream EBITDA increased by 46.7% year-on-year to RUB 127,107 million from RUB 86,672 million in 2017 primarily due to: (i) wider spreads, as the increase in international benchmark prices for liquids more than compensated higher purchase prices for the Group's hydrocarbon feedstock, as well as (ii) higher volumes of raw NGL fractionation. In 2018, the Group's Midstream Adjusted EBITDA was RUB 127,771 million as compared to RUB 87,415 million in 2017.

In 2018, the segment EBITDA margin was 43.1%, a year-on-year increase from 38.8%. The higher margin was mainly attributable to wider spreads between purchased hydrocarbon feedstock and NGLs selling prices.

In 2017, the Group's Midstream EBITDA increased by 43.2% year-on-year to RUB 86,672 million from RUB 60,526 million in 2016 primarily due to: (i) wider spreads, as the increase in international benchmark prices for liquids was only partially negated by higher netbacks for the Group's hydrocarbon feedstock; (ii) higher share of APG in the Group's feedstock mix with APG processing more profitable compared to raw NGL; and (iii) changes in sales mix as the Group fully utilised previously available volumes of raw NGL internally at the Group's expanded fractionation capacity and as a result increased share of LPG external sales with higher margins, as well as LPG and naphtha supplies to the Group's petrochemicals businesses. These factors were partially offset by lower sales volumes of liquids on lower NGLs supplies and termination of naphtha trading agreements. The segment was also the major beneficiary of the decrease in the Group transportation and logistics expenses (see "— Operating expenses" below). In 2017, the Group's Midstream Adjusted EBITDA was RUB 87,415 million as compared to RUB 61,211 million in 2016.

In 2017, the segment EBITDA margin was 38.8% as compared to 31.0% in the previous period. The higher margin was mainly attributable to wider spreads between hydrocarbon feedstock and NGL's selling prices.

Operating expenses

The following table sets forth the Group's operating expenses for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December % of Change % of Change % of 2018 revenue 2018/2017 2017 revenue 2017/2016 2016 revenue (RUB millions, except as stated) Feedstock and materials(1) ...... 130,669 23.0% 48.5% 87,983 19.4% 6.0% 82,993 20.2% Transportation and logistics .... 75,021 13.2% 11.9% 67,058 14.8% (9.1%) 73,738 17.9% Staff costs ...... 43,171 7.6% 12.6% 38,334 8.4% 11.1% 34,510 8.4% Energy and utilities ...... 39,839 7.0% 2.8% 38,770 8.5% 2.8% 37,716 9.2% Depreciation and amortisation . 35,510 6.2% 0.1% 35,486 7.8% 1.4% 34,996 8.5% Goods for resale ...... 32,512 5.7% 40.3% 23,170 5.1% 63.4% 14,182 3.4% - 107-

Year ended 31 December % of Change % of Change % of 2018 revenue 2018/2017 2017 revenue 2017/2016 2016 revenue (RUB millions, except as stated) Services provided by third parties ...... 29,645 5.2% 109.8% 14,129 3.1% 33.4% 10,594 2.6% Repairs and maintenance(1) ...... 12,792 2.2% (3.4%) 13,242 2.9% 55.2% 8,534 2.1% Taxes other than income tax .... 3,983 0.7% 20.2% 3,313 0.7% 47.5% 2,246 0.5% Processing services by third parties ...... 3,696 0.6% 10.9% 3,333 0.7% 63.4% 2,040 0.5% Charity and sponsorship, marketing and advertising ...... 2,297 0.4% 12.5% 2,041 0.4% 18.2% 1,727 0.4% Rent expenses ...... 1,603 0.3% 18.4% 1,354 0.3% 7.8% 1,256 0.3% Impairment of PPE ...... 416 0.1% 153.7% 164 — (89.1%) 1,502 0.4% Impairment of assets held for sale ...... — — — 180 — — — — (Gain)/loss on disposal of PPE (4,503) (0.8%) — 319 0.1% 85.5% 172 — Change in WIP and refined products balances ...... (6,247) (1.0%) 246.5% (1,803) (0.3%) 534.9% (284) (0.1%) Other ...... 3,162 0.6% 25.2% 2,525 0.6% (8.5%) 2,759 0.7% Operating expenses ...... 403,566 71.0% 22.4% 329,598 72.5% 6.8% 308,681 75.0% ______Note: (1) Starting from 2017, the cost of spare parts and materials for repairs was reclassified from "Feedstock and materials" line item to "Repairs and maintenance" line item.

In 2018, the Group's operating expenses increased by 22.4% to RUB 403,566 million as compared to RUB 329,598 million a year earlier. The increase was due to: (i) an increase in feedstock costs, which was largely driven by higher international benchmarks, (ii) a substantial growth in services provided by third parties, which was attributable to NIPIGAS activities, and (iii) an increase in expenses related to purchase of goods for resale.

In 2017, the Group's operating expenses increased by 6.8% to RUB 329,598 million as compared to RUB 308,681 million a year earlier. The increase was primarily attributable to: (i) higher feedstock costs following an increase in prices of NGLs, and (ii) an increase in purchases of goods for resale, which was also reflected in the Group's revenues. These factors were partially offset by the decrease in transportation and logistics costs, largely on lower transported volumes of NGLs, as well as certain shifts in logistics structure.

Feedstock and materials

In 2018, the Group's feedstock and material costs increased by 48.5% to RUB 130,669 million or 23.0% of the Group's total revenue, as compared to RUB 87,983 million or 19.4% of the Group's total revenue a year earlier. This increase was largely driven by higher expenses related to purchases of hydrocarbon feedstock, which were primarily attributable to the increase in the respective export netbacks.

In 2017, the Group's feedstock and materials costs increased by 6.0% year-on-year to RUB 87,983 million or 19.4% of the Group's total revenue, as compared to RUB 82,993 million or 20.2% of the Group's total revenue a year earlier. The increase was driven by higher expenses related to purchases of hydrocarbon feedstock, largely due to the increase in the respective export netbacks and partially compensated by the Rouble appreciation and lower other feedstock and materials expenses.

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The following table presents information on the Group's costs related to purchasing of feedstock and materials for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December % of % of % of feedstock feedstock feedstock and and and materials Change materials Change materials 2018 expenses 2018/2017 2017 expenses 2017/2016 2016 expenses (RUB millions, except as stated) NGLs ...... 63,234 48.4% 79.0% 35,322 40.1% 31.7% 26,787 32.3% APG ...... 30,445 23.3% 16.7% 26,077 29.6% 16.5% 22,376 27.0% Paraxylene ...... 9,174 7.0% 37.0% 6,697 7.6% 0.0% 6,697 8.1% Benzene ...... 5,001 3.8% 11.9% 4,467 5.1% 7.1% 4,169 5.0% Change of stock ...... (2,810) (2.2%) — 1,049 1.2% — (1,523) (1.8%) Other feedstock and materials ...... 25,625 19.6% 78.3% 14,371 16.3% (41.3%) 24,487 29.5% Feedstock and materials, total ...... 130,669 100.0% 48.5% 87,983 100.0% 6.0% 82,993 100.0%

The following table presents selected data on the Group's feedstock purchasing volumes for the years ended 31 December 2018, 2017 and 2016 (excluding volumes purchased for trading, which are reported as goods for resale):

Year ended 31 December Change Change 2018 2018/2017 2017 2017/2016 2016 (tonnes, except as stated) NGLs ...... 3,489,873 15.8% 3,013,229 (11.7%) 3,413,144 APG, thousands cubic metres...... 22,283,359 0.0% 22,280,387 1.6% 21,927,209 Paraxylene ...... 176,386 (0.4%) 177,061 3.5% 171,034 Benzene ...... 143,433 0.5% 142,695 1.9% 140,006

In 2018, the Group's expenses related to purchases of NGLs increased by 79.0% to RUB 63,234 million or 48.4% of the Group's total feedstock and materials expenses, as compared to RUB 35,322 million or 40.1% of the Group's total feedstock and materials expenses in 2017. This increase was attributable to: (i) the growth in the effective average purchase price by RUB 6,397 per tonne, or by 54.6%, in line with an increase in international benchmarks (LPG Argus CIF ARA was up by RUB 6,299 per tonne, or by 24.7%, year-on-year), and (ii) a structural change in NGLs consumption with marginal growth of more expensive naphtha. The Group also recorded a 15.8% (or 476,644 tonnes in absolute terms) increase in purchasing volumes of NGLs, which was mainly attributable to: (i) new supply arrangements for naphtha deliveries to the Group's cracker in Tomsk, and (ii) higher volumes of raw NGL due to a new supply contract with Surgutneftegas.

In 2017, the Group's expenses related to purchases of NGLs increased by 31.7% to RUB 35,322 million or 40.1% of the Group's total feedstock and materials expenses, from RUB 26,787 million or 32.3% of the Group's total feedstock and materials expenses in 2016. This increase was attributable to the growth in the effective average purchase price by RUB 3,874 per tonne (or 49.4%) largely on higher international benchmarks for liquids resulting in the respective export netbacks dynamics, which was only partially compensated by the Rouble appreciation. This factor was partially offset by the decrease in purchasing volumes by 11.7% year-on-year, mainly due to lower supplies from Gazprom due to changes in their product mix, as well as lower volumes of raw NGL supplied by NOVATEK as a result of a decrease in its gas condensate production.

In 2018, the Group's expenses related to purchases of APG increased by 16.7% to RUB 30,445 million as compared to RUB 26,077 million in 2017, which represented a decrease as a percentage of the Group's total feedstock and materials expenses to 23.3% in 2018 from 29.6% in 2017. The increase in the Group's expenses related to purchases of APG in absolute terms was primarily driven by the growth in the effective average purchase price by RUB 196 per bcm (16.7%) backed - 109-

by higher international benchmarks for liquids reflected in the respective export netbacks dynamics, as well as a 3.9% indexation of regulated natural gas prices as of 1 July 2017 and a 3.4% indexation as of 21 August 2018. The Group's APG purchasing volumes were relatively flat year-on-year.

In 2017, the Group's expenses related to purchases of APG increased by 16.5% to RUB 26,077 million from RUB 22,376 million in 2016, increasing as a percentage of total feedstock and materials expenses to 29.6% from 27.0%. The increase in expenses was attributable to a 14.7% increase in the effective average purchase price and a 1.6% increase in purchasing volumes. The increase in the effective average purchase price by RUB 150 per Bcm was driven by higher international benchmarks for liquids reflected in the respective export netbacks dynamics, as well as a 3.9% indexation of regulated natural prices as of 1 July 2017. The increase in purchasing volumes was largely attributable to higher supplies from oil companies from higher oil production on certain oilfields.

In 2018, the Group's other feedstock and materials expenses increased by 78.3% to RUB 25,625 million as compared to RUB 14,371 million in 2017. This increase was primarily attributable to: (i) higher purchases of materials and spare parts used by NIPIGAS under project management and construction services, and (ii) a new swap arrangement with the Group's counterparties to optimise logistics.

In 2017, the Group's other feedstock and materials expenses decreased by 41.3% to RUB 14,371 million from RUB 24,487 million in 2016, decreasing as a percentage of total feedstock and materials expenses to 16.3% from 29.5%. The decrease was mainly attributable to: (i) higher naphtha processing and accordingly higher recoverable excise in 2017 that reduced feedstock and materials expenses; and (ii) reclassification of the cost of spare parts and materials for repairs from "Other feedstock and materials" line item to "Repairs and maintenance" line item.

Transportation and logistics

In 2018, the Group's transportation and logistics expenses increased by 11.9% to RUB 75,021 million as compared to RUB 67,058 million in 2017, which represented a decrease as a percentage of the Group's total revenue to 13.2% in 2018 from 14.8% a year earlier. The increase was largely attributable to higher transported volumes of LPG for export sales, which grew by 356 thousand tonnes. Transportation and logistics expenses were also impacted by a 5.4% indexation in Railway Tariffs by the FAS in January 2018 (see "— Certain Factors Affecting the Group's Results of Operations — Transportation Tariffs — Railway Transportation Tariffs").

In 2017, the Group's transportation and logistics expenses decreased by 9.1% to RUB 67,058 million from RUB 73,738 million in 2016, decreasing as a percentage of total revenue to 14.8% from 17.9% a year earlier. The decrease in expenses was largely attributable to lower transported volumes of the following products: (i) raw NGL due to higher fractionation volumes in Tobolsk and lower third-party purchases, partially replaced by higher transported volumes of LPG; (ii) MTBE due to Uralorgsintez divestment, and (iii) externally sold naphtha. Certain changes in sales and the logistics structure, largely related to lower NGL export sales and changes in the Group's export routes, contributed to the decrease. Higher Railway Tariffs (see "— Certain Factors Affecting the Group's Results of Operations — Transportation Tariffs — Railway Transportation Tariffs") were fully compensated by the Rouble appreciation.

Staff costs

In 2018, the Group's staff costs increased by 12.6% to RUB 43,171 million as compared to RUB 38,334 million in 2017, decreasing as a percentage of total revenue to 7.6% in 2018 from 8.4% a - 110-

year earlier. The increase in the Group's staff costs in absolute terms was primarily attributable to an increase in average salaries in 2018 which was partially offset by decrease in the Group's average headcount.

In 2017, the Group's staff costs increased by 11.1% to RUB 38,334 million from RUB 34,510 million in 2016, remaining flat as a percentage of total revenue at 8.4%. The increase in absolute terms was primarily attributable to (i) the growth in the headcount of NIPIGAS as a result of the expansion in their operations, (ii) changes in bonus provisions, and (iii) an increase in average salaries, partially compensated by a decrease in the headcount and changes in the perimeter of the Group due to Uralorgsintez divestment.

Energy and utilities

The following table presents data on the Group's energy and utilities costs for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December % of total % of total % of total energy and energy and energy and utilities Change utilities Change utilities 2018 expenses 2018/2017 2017 expenses 2017/2016 2016 expenses (RUB millions, except as stated) Electricity ...... 23,978 60.2% 4.6% 22,918 59.1% 5.6% 21,706 57.6% Fuel (primarily natural gas) ..... 8,541 21.4% 0.9% 8,469 21.8% 3.5% 8,181 21.7% Heat ...... 5,036 12.6% (2.9%) 5,188 13.4% (6.6%) 5,553 14.7% Other ...... 2,284 5.8% 4.1% 2,195 5.7% (3.5%) 2,275 6.0% Energy and utilities, total ...... 39,839 100.0% 2.8% 38,770 100.0% 2.8% 37,716 100%

In 2018, the Group's energy and utilities expenses increased by 2.8% to RUB 39,839 million as compared to RUB 38,770 million in 2017, which represented a decrease as a percentage of the Group's total revenue to 7.0% in 2018 from 8.5% a year earlier. The increase in the Group's energy and utilities expenses in absolute terms was primarily attributable to higher average electricity tariffs. The Group's effective average electricity tariff was up by 4.5% due to the indexation in the regions of the Group's operations, while the Group's effective average heat tariff remained almost flat.

In 2017, the Group's energy and utilities expenses increased by 2.8% to RUB 38,770 million from RUB 37,716 million in 2016, decreasing as a percentage of the Group's total revenue to 8.5% in 2017 from 9.2% in 2016. The increase was primarily attributable to higher energy and utilities tariffs and the growth in the Group's production volumes, which were partially offset by Uralorgsintez divestment in April 2017. The Group's effective average electricity tariff was up by 5.5% and its effective average heat tariff was up by 8.0% due to indexation in the regions of its operations.

Depreciation and amortisation

In 2018, the Group's depreciation and amortisation expenses were largely flat at RUB 35,510 million, decreasing as a percentage of total revenue to 6.2% in 2018 from 7.8% a year earlier.

In 2017, the Group's depreciation and amortisation expenses increased by 1.4% to RUB 35,486 million from RUB 34,996 million in 2016, decreasing as a percentage of total revenue to 7.8% in 2017 from 8.5% in 2016. This increase was attributable to (i) the commissioning of new production facilities following completion of polyolefin capacity expansion in Tomsk, (ii) higher depreciation of new catalysts at the Group's production sites, and (iii) higher amortisation following the acquisition of Tobolsk HPP. These factors were partially offset by changes in the perimeter of the Group due to Uralorgsintez divestment. - 111-

Goods for resale

In 2018, the Group's expenses related to purchases of goods for resale increased by 40.3% to RUB 32,512 million as compared to RUB 23,170 million in 2017, increasing as a percentage of the Group's total revenue to 5.7% in 2018 from 5.1% a year earlier. This increase was primarily attributable to (i) MTBE purchases from Uralorgsintez following its divestment in April 2017, as well as growth in international benchmarks, (ii) higher volumes of LPG purchased under a trading arrangement, and (iii) higher volumes of PP purchases from the Group's JV NPP Neftekhimia mainly due to the lengthy turnaround at the site a year earlier.

In 2017, the Group's expenses related to purchases of goods for resale increased by 63.4% to RUB 23,170 million from RUB 14,182 million in 2016, increasing as a percentage of total revenue to 5.1% in 2017 from 3.4% in 2016. This increase was driven by (i) higher processing volumes of raw NGL for NOVATEK with the subsequent increase in LPG purchases for resale from this counterparty, (ii) higher volumes of MTBE purchases for resale, and (iii) higher volumes of equipment purchased by NIPIGAS for further resale. These factors were partially offset by lower volumes of naphtha purchases due to the termination of a temporary trading arrangement, as well as lower PP purchases from NPP Neftekhimia, which was on the lengthy maintenance shutdown in the first half of 2017.

Services provided by third parties

In 2018, the Group's expenses related to services provided by third parties increased more than twice year-on-year to RUB 29,645 million from RUB 14,129 million in 2017, increasing as a percentage of the Group's total revenue to 5.2% in 2018 from 3.1% a year earlier. This increase was largely attributable to higher expenses of NIPIGAS related to subcontractors.

In 2017, the Group's expenses related to services provided by third parties increased by 33.4% to RUB 14,129 million from RUB 10,594 million in 2016, increasing as a percentage of the Group's total revenue to 3.1% from 2.6% in 2016. This increase was primarily attributable to the expenses of NIPIGAS related to the subcontractors.

Repairs and maintenance

In 2018, the Group's repairs and maintenance expenses decreased by 3.4% to RUB 12,792 million from RUB 13,242 million in 2017 primarily due to longer maintenance cycles in 2018 as compared to 2017.

In 2017, the Group's repairs and maintenance expenses increased by 55.2% to RUB 13,242 million from RUB 8,534 million in 2016. This increase was mainly attributable to reclassification of the cost of spare parts and materials for repairs from "Feedstock and materials" line item to "Repairs and maintenance" line item.

Taxes other than income tax

In 2018, the Group's taxes other than income tax increased by 20.2% to RUB 3,983 million as compared to RUB 3,313 million in 2017. This increase was primarily attributable to an increase of the effective property tax rate due to suspension by local authorities of tax incentives for the Group in the form of a lower property tax rate for a number of production sites.

In 2017, the Group's taxes other than income tax increased by 47.5% to RUB 3,313 million from RUB 2,246 million in 2016. This increase was primarily attributable to an increase of the effective property tax rate, due to the suspension by local authorities of tax incentives for the Group in the form of a lower property tax rate. - 112-

Processing services of third parties

In 2018, the Group's expenses related to third-party processing services increased by 10.9% to RUB 3,696 million as compared to RUB 3,333 million in 2017. This increase was largely attributable to Uralorgsintez divestment in April, 2017 as the Group continues to process certain types of its feedstock into finished goods using significant parts of relevant Uralorgsintez's production facilities.

In 2017, the Group's expenses related to third-party processing services increased by 63.4% to RUB 3,333 million from RUB 2,040 million in 2016. This increase was largely attributable to Uralorgsintez divestment.

Charity and sponsorship, marketing and advertising

In 2018, the Group's combined expenses related to charity and sponsorship, marketing and advertising increased by 12.5% to RUB 2,297 million as compared to RUB 2,041 million in 2017. This increase was primarily attributable to higher expenses relating to sponsorship of sports organisations and cultural initiatives.

In 2017, the Group's combined expenses related to charity and sponsorship, marketing and advertising increased by 18.2% to RUB 2,041 million from RUB 1,727 million in 2016, remaining flat as a percentage of total revenue at 0.4%. This increase was mainly due to an increase in expenses for the Group's sponsorship of local and regional sports organisations as part of the Group's initiative to increase its participation in and support for local communities.

Operating profit

In 2018, the Group's operating profit increased by 32.0% to RUB 165,081 million as compared to RUB 125,021 million in 2017.

In 2017, the Group's operating profit increased by 21.2% year-on-year to RUB 125,021 million from RUB 103,131 million in 2016.

The corresponding operating margin was 29.0%, 27.5% and 25.0% in 2018, 2017 and 2016, respectively.

Net finance expense and income

In 2018, the Group reported a net finance expense of RUB 29,359 million, as compared to net finance income of RUB 3,983 million and RUB 31,284 million in 2017 and 2016, respectively. The net finance expense in 2018 was primarily attributable to a significant foreign exchange loss in 2018, as compared to foreign exchange gains received in 2017 and 2016.

The following table presents data on the Group's net finance expense and income for the years ended 31 December 2018, 2017 and 2016:

Year ended 31 December Change Change 2018 2018/2017 2017 2017/2016 2016 (RUB millions, except as stated) Interest income ...... 1,464 (27.2%) 2,012 98.6% 1,013 Interest expense ...... (945) (85.3%) (6,416) (53.8%) (13,880) Foreign exchange (loss)/gain ...... (28,888) — 9,043 (81.5%) 48,924 Other finance expense ...... (990) 50.9% (656) (86.3%) (4,773) Net finance (expense)/income ...... (29,359) — 3,983 (87.3%) 31,284

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In 2018, the Group's interest expense decreased by 85.3% to RUB 945 million as compared to RUB 6,416 million in 2017. This decrease was primarily attributable to capitalisation of the interest accrued on ZapSibNeftekhim-related loans. The total accrued interest amounted to RUB 14,695 million and RUB 15,893 million in 2018 and 2017, respectively.

In 2017, the Group's interest expense decreased more than twice to RUB 6,416 million from RUB 13,880 million in 2016 largely due to substantial repayment of its conventional debt, as well as lower average RUB/USD and RUB/EUR rates in 2017 compared to 2016.

In 2018, the Group recorded a non-cash foreign exchange loss in the amount of RUB 28,888 million compared to a foreign exchange gain of RUB 9,043 million recorded in 2017. The loss in 2018 was mainly attributable to the depreciation of the Rouble against U.S. dollar and euro and respective revaluation of debt denominated in these currencies.

In 2017, the Group recorded a non-cash foreign exchange gain in the amount of RUB 9,043 million compared to RUB 48,924 million reported in 2016, which was attributable to the substantial appreciation of the Rouble against the euro and the U.S. dollar and respective revaluation of debt denominated in these currencies.

Result of subsidiary's disposal and remeasurement of related assets

In 2018, the Group recorded a loss of RUB 425 million from remeasurement of related assets for the sale of subsidiary Portenergo LLC in 2015.

In 2017, the Group recognised a gain of RUB 19,805 million on the disposal of a subsidiary following the sale of Uralorgsintez to EKTOS in April 2017. The gain represented the difference between the cash consideration and net book value of the asset as of the disposal date.

Result of subsidiary's acquisition and remeasurement of related liabilities

In 2018, the Group recognised a loss from remeasurement of related liabilities for the acquisition of Tobolsk HPP from JSC Fortum in the amount of RUB 217 million, as compared to RUB 965 million in 2017.

In 2016, the non-cash positive result of the acquisition of a subsidiary amounted to RUB 1,666 million following the acquisition of Tobolsk HPP in February 2016 and revaluation of related liabilities.

Share of net income/loss of joint ventures and associates

In 2018, the Group recorded a share in net income of joint ventures and associates in the amount of RUB 3,173 million compared to RUB 2,073 million reported in 2017. The increase was largely attributable to the higher income of NPP Neftekhimia in 2018 as the plant was on a maintenance shutdown in the first half of 2017 with a subsequent marginal capacity increase.

In 2017, the Group recorded a share in net income of joint ventures and associates in the amount of RUB 2,073 million compared to RUB 6,471 million reported in 2016. The decrease was largely attributable to the lower income of RusVinyl, mainly due to foreign exchange dynamics related to its debt, as well as to the lower income of NPP Neftekhimia resulting from a maintenance shutdown at the production site of the JV in the first half of 2017.

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Income tax expense

In 2018, the Group's income tax expense decreased by 7.3% to RUB 27,493 million as compared to RUB 29,671 million in 2017. The decrease was driven by lower pre-tax profit in 2018.

In 2017, the Group's income tax expense increased by 0.7% to RUB 29,671 million compared to RUB 29,463 million in 2016. The increase was driven by higher pre-tax profit and partly offset by lower foreign exchange gain compared to the previous year.

Profit for the year

As a result of the factors described above, in 2018, the Group's profit decreased by 7.9% to RUB 110,760 million, as compared to RUB 120,246 million in 2017, which in turn represented an increase from RUB 113,089 million in 2016.

The Group's net margin was 19.5%, 26.4% and 27.5% in 2018, 2017 and 2016, respectively. In 2018, profit attributable to shareholders of the Group decreased to RUB 106,329 million, as compared to RUB 116,909 million in 2017, which represented an increase from RUB 111,139 million in 2016.

EBITDA

In 2018, the Group's EBITDA increased by 25.0% to RUB 201,007 million from RUB 160,851 million in 2017. The growth was driven by strong performance of the Midstream segment, where EBITDA increased by 46.7% to RUB 127,107 million from RUB 86,672 million in an environment of higher oil prices and a weaker Rouble. EBITDA of the Plastics, Elastomers and Intermediates segment in 2018 improved compared to 2017 but this growth was almost negated by weaker EBITDA of the Olefins and Polyolefins segment, primarily reflecting weaker spreads, as well as maintenance shutdowns at the Group's major production sites. In 2018, the Group's Adjusted EBITDA was RUB 205,529 million compared to RUB 164,964 million in 2017.

In 2017, the Group's EBITDA increased by 15.2% to RUB 160,851 million from RUB 139,629 million in 2016. The growth was driven by the strong performance in the Midstream segment, in which EBITDA increased approximately by half to RUB 86,672 million from RUB 60,526 million. The increase resulted from wider spreads between selling prices for liquids and netbacks for the Group's purchased hydrocarbon feedstock. The growth was almost negated by weaker EBITDA of the Group's petrochemicals businesses in rouble terms, as relatively flat spreads were offset by the Rouble appreciation. The joint contribution of the Group's Olefins and Polyolefins and Plastics, Elastomers and Intermediates segments decreased by 3.4% year-on-year to RUB 77,673 million from RUB 80,417 million. In U.S. dollar terms, the Group observed an opposite dynamic with joint petrochemicals EBITDA demonstrating 7.1% growth due to a more resilient spread in original currencies net of domestic currency fluctuations. In 2017, the Group's Adjusted EBITDA was RUB 164,964 million compared to RUB 146,221 million in 2016.

LIQUIDITY AND CAPITAL RESOURCES

The Group's source of liquidity is cash generated from its operations, and borrowings from financial institutions and Eurobonds. The Group's ability to rely on these sources of funding could be affected by its results of operations and financial position and by the conditions in the Russian and international financial markets.

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Cash Flows

The following table presents selected data on the Group's net cash flows for the six months ended 30 June 2019 and 2018 and for the years ended 31 December 2018, 2017 and 2016:

Six months ended Year ended 30 June 31 December 2019(1) 2018 2018 2017 2016(2) (RUB millions) Net cash from operating activities ...... 55,207 70,645 160,409 152,677 137,694 Operating cash flows before working capital changes ...... 84,921 87,044 194,796 161,940 142,142 Changes in working capital ...... (9,499) (5,601) (9,805) 10,377 8,464 Income tax paid ...... (20,215) (10,798) (24,582) (19,640) (12,912) Net cash used in investing activities, including (60,951) (68,633) (133,286) (106,035) (142,243) Capital expenditures(3) ...... (67,685) (70,307) (151,438) (135,261) (145,693) Grants and subsidies ...... 5,830 2,378 9,536 11,274 1,723 Proceeds from sale of property, plant and equipment ...... 831 104 9,617 65 283 Proceeds from disposal of subsidiaries, net of cash disposed ...... — — — 22,136 3,445 Net cash from/(used in) financing activities, including ...... 10,551 (28,354) (63,857) (57,774) (104,718) Dividends paid to SIBUR's shareholders ...... (23,905) (15,604) (27,126) (19,709) (16,163) Net proceeds from / (repayment of) debt ...... 44,409 (5,485) (22,266) (23,087) (64,036) Interest paid ...... (6,399) (6,890) (13,569) (14,655) (21,894) Bank commissions paid ...... (196) (375) (896) (1,707) (3,239) Effect of exchange rate changes on cash and cash equivalents ...... (665) 1,668 3,061 (1,047) (2,181) Net (decrease)/increase in cash and cash equivalents ...... 4,142 (24,674) (33,673) (12,179) (111,448) ______Notes: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16". (2) In 2018 the Group adopted new accounting policy for classification of proceeds from grants received for the purchase of property, plant and equipment in consolidated cash flow statement. Proceeds from grants for the year ended 31 December 2016 were reclassified in the Prospectus to conform the presentation of the Interim Financial Statements and the Annual 2018 Financial Statements. (3) Capital expenditures mean cash used for purchase of property, plant and equipment, intangible assets and non-current assets.

Net Cash from Operating Activities

In the first half of 2019, the Group's net cash from operating activities decreased by 21.9% to RUB 55,207 million from RUB 70,645 million in the first half of 2018. The Group's operating cash flows before working capital changes decreased by RUB 2,123 million or 2.4% due to a decrease in EBITDA. The changes in working capital had a negative impact on the Group's net cash from operating activities in the amount of RUB 9,499 million in the first half of 2019 as compared to a negative impact of RUB 5,601 million in the first half of 2018. Working capital changes were primarily attributable to the substantial increase in inventories, mainly paraxylene volumes accumulated as part of the PTA expansion project (see "Business — Capital Expenditure — Pure terephthalic acid (PTA) production upgrade at Polief"). An additional factor was a temporary increase in trade and other receivables related to NIPIGAS project management services. The Group's income tax paid increased by RUB 9,417 million or 87.2% in the first half of 2019 as compared to the first half of 2018 as a result of (i) higher pre-tax profit for the reporting period due to substantial financial income recognised in the period, (ii) a one-off gain recognised following the sale of the LPG tank car fleet in October 2018 and (iii) utilisation in the first quarter of 2018 of prepaid taxes accumulated during the previous periods. - 116-

In 2018, the Group's net cash from operating activities increased by 5.1% to RUB 160,409 million from RUB 152,677 million in 2017. Operating cash flows before working capital changes increased by RUB 32,856 million or 20.3% year-on-year on the back of higher EBITDA. Changes in working capital had a negative impact on the Group's net cash from operating activities in the amount of RUB 9,805 million in 2018 as compared to a positive effect of RUB 10,377 million a year earlier. Negative working capital change was driven by a stock pile up mainly due to planned PTA expansion (for further details on this project, see "Business — Capital Expenditure — Pure terephthalic acid (PTA) production upgrade at Polief"), higher goods in transit as well as higher inventories balances under NIPIGAS contracts. Income tax paid increased by 25.2% to RUB 24,582 million in 2018 from RUB 19,640 million a year earlier, as in 2017 income tax paid on the disposal of Uralorgsintez was recorded under investing activities. Including income tax on the disposal, income tax paid in 2017 was RUB 23,111 million.

In 2017, the Group's net cash from operating activities increased by 10.9% to RUB 152,677 million from RUB 137,694 million in 2016. Operating cash flows before working capital changes increased by 13.9% year-on-year to RUB 161,940 million from RUB 142,142 million in 2016 due to higher operating profit that was up by 21.2%. Income tax paid increased by half and was RUB 19,640 million as compared to RUB 12,912 million a year earlier, as the Group utilised advance tax payments in 2016 accumulated during previous years.

The following table presents data on changes in working capital for the six months ended 30 June 2019 and 2018 and for the years ended 31 December 2018, 2017 and 2016:

Six months ended Year ended 30 June 31 December 2019 2018 2018 2017 2016 (RUB millions) Increase in advances received under project management and construction services ...... 5,292 28,258 45,375 56,670 41,412 Increase in trade and other payables ...... 13,831 7,449 26,127 17,660 2,699 (Decrease)/increase in taxes payable ...... (1,680) (1,238) 2,413 2,878 2,316 (Decrease)/increase in prepayments and other current assets ...... (1,443) 3,903 (2,553) (7,744) (87) (Decrease)/increase in inventories ...... (4,155) (7,148) (8,082) (1,156) (1,153) (Decrease)/increase in trade and other receivables ...... (15,676) (7,356) (25,138) (3,944) 1,016 (Decrease)/increase in advances issued under project management and construction services . (5,669) (29,469) (47,947) (53,987) (37,739) Changes in working capital ...... (9,499) (5,601) (9,805) 10,377 8,464

Net cash used in investing activities

In the first half of 2019, the Group's net cash used in investing activities decreased by 11.2% to RUB 60,951 million from RUB 68,633 million in the first half of 2018 due to lower capital expenditures as ZapSibNeftekhim moved closer to completion, partially offset by payments for purchased catalysts and higher financing of smaller-scale projects. Additionally, in the first half of 2019, the Group received RUB 5,830 million in grants and subsidies as compared to RUB 2,378 million received in the corresponding period of 2018, from regional budgets as a partial refund of capital expenditures incurred in the respective regions of the Group's investments.

In 2018, the Group's net cash used in investing activities increased by 25.7% to RUB 133,286 million from RUB 106,035 million in 2017. The increase was primarily attributable to a 12.0% increase in the Group's capital expenditures, largely due to the ongoing ZapSibNeftekhim construction, and the low base in 2017 as the Group received proceeds from the divestment of Uralorgsintez. The increase was partly offset by proceeds in the amount of RUB 9,475 million the Group received in 2018 from the sale of its own tanks for LPG transportation. - 117-

In 2017, the Group's net cash used in investing activities decreased by 25.5% year-on-year to RUB 106,035 million from RUB 142,243 million a year earlier, which was largely attributable to receipt of proceeds in 2017 from the divestment of Uralorgsintez for a cash consideration of RUB 22,136 million and a 7.2% decrease in the Group's capital expenditures, despite ongoing ZapSibNeftekhim construction, as a result of the Rouble appreciation against the euro and the U.S. dollar that affected its payments in these currencies, significant advances paid in 2016, and shifts in the project's payments schedules with certain amounts moving from 2017 to 2018. Additionally, in 2017 the Group received RUB 11,274 million in federal, regional grants and subsidies as compared to RUB 1,723 million regional subsidies received in 2016 as a partial refund of capital expenditures incurred in the respective regions of SIBUR's investments.

Net Cash From/(Used in) Financing Activities

In the first half of 2019, the Group received net cash from financing activities in the amount of RUB 10,551 million. This was primarily related to the new borrowings and tranches for ZapSibNeftekhim funding and general corporate purposes, partially offset by repayment of lease liabilities under IFRS 16 (see "— Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16"). In the first half of 2018, the Group used net cash in financing activities in the amount of RUB 28,354 million. This was related primarily to repayment of Eurobonds 2013 (USD 443 million), while the Group borrowed USD 100 million of ZapSibNeftekhim-related debt.

In 2018, the Group's net cash used in financing activities increased by 10.5% to RUB 63,857 million from RUB 57,774 million in 2017. The increase was primarily due to higher dividends payouts as compared to the corresponding period of 2017. The Group paid RUB 27,126 million and RUB 19,709 million in dividends to the Group's shareholders in 2018 and 2017, respectively.

In 2017, the Group's net cash used in financing activities decreased by 44.8% to RUB 57,774 million from RUB 104,718 million in 2016, primarily due to lower net debt repayment and lower interests paid as compared to 2016.

Dividends paid in the six months ended 30 June 2019 and 2018, and the years ended 31 December 2018, 2017 and 2016, amounted to RUB 23,905 million, RUB 15,604 million, RUB 27,126 million, RUB 19,709 million and RUB 16,163 million, respectively.

Working Capital

The Group's working capital position takes into account trade receivables net of advances from customers; inventory balances of refined products and work in progress, goods for resale, feedstock and materials; VAT balance; trade payables net of prepayments and advances to suppliers; payables to employees; and other assets and liabilities listed in the table below. As of 30 June 2019, the Group's working capital amounted to negative RUB 4,439 million.

The Group's net working capital balance may fluctuate from period to period due to factors within or outside the Group's control, such as market conditions, the Group's tactical marketing initiatives in response to changes in market conditions, logistical constraints, completion of major investment projects, which could require substantial inventory accumulation, as well as the Group's activities under project management and construction services.

In addition, the Group's management monitors its liquidity and operational efficiency on the basis of its adjusted working capital. As of 30 June 2019 and 31 December 2018, 2017 and 2016, the Group's adjusted working capital was positive RUB 36,509 million, RUB 22,818 million,

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RUB 17,690 million and RUB 28,385 million, respectively. In calculating adjusted working capital, the Group makes the following adjustments to current assets and current liabilities:

As of As of 30 June 31 December 2019(1) 2018 2017 2016 (RUB millions, except as stated) Current assets ...... 248,007 218,524 176,514 142,976 Current liabilities ...... (252,446) (234,477) (174,925) (85,954) Working capital ...... (4,439) (15,953) 1,589 57,022 Adjustments to assets, including: ...... 19,238 29,299 (1,850) (31,235) Cash and cash equivalents...... (18,925) (14,783) (48,456) (60,635) Long-term advances issued under project management and construction services ...... 50,500 53,509 52,027 33,109 Receivables under project management and construction services ...... (8,858) (5,336) (966) — Prepaid borrowing cost ...... (3,479) (4,091) (4,455) (3,709) Adjustments to liabilities, including: ...... 21,710 9,472 17,951 2,598 Accounts payable to contractors and suppliers of property, plant and equipment ...... 34,518 44,210 41,009 11,605 Payables for acquisition of subsidiaries ...... 2,142 3,280 2,619 2,104 Interest payable ...... 1,845 1,863 2,087 2,182 Long-term advances received under project management and construction services ...... (63,323) (66,268) (58,524) (35,481) Payables under project management and construction services ...... 8,328 4,253 914 - Short-term lease liabilities ...... 5,190 — — — Short-term debt and current portion of long-term borrowings ...... 33,010 22,134 29,846 22,188 Adjusted working capital ...... 36,509 22,818 17,690 28,385 Percentage of sales (%) ...... 14% 4% 4% 7% Revenue for the period then ended ...... 266,279 568,647 454,619 411,812 Adjusted working capital turnover, days...... 25.5 14.6 14.2 25.2 ______Note: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16".

Capital Expenditures

The Group's capital expenditures represent capital cash flow and include purchase of property, plant and equipment, intangible assets and other non-current assets, amounted (net of VAT) to RUB 67,685 million, RUB 70,307 million, RUB 151,438 million, RUB 135,261 million and RUB 145,693 million in the six months ended 30 June 2019 and 2018 and the years ended 31 December 2018, 2017 and 2016, respectively. These amounts were mainly driven by the Group's investments in ZapSibNeftekhim project. See "Business — Overview of Business Segments — Olefins and Polyolefins Segment — ZapSibNeftekhim Investment Project".

The following table sets forth information on the Group's key capital expenditure projects in the six months ended 30 June 2019 and 2018 and the years ended 31 December 2018, 2017 and 2016:

Six months ended Year ended 30 June 31 December Location Description 2019 2018 2018 2017 2016 Completion (RUB millions, except as stated) Expansion Tobolsk ...... ZapSibNeftekhim 37,945 54,465 112,369 106,896 121,395 2019

Tobolsk/Kaluga ...... Logistic platform 2,946 2,758 5,757 7,287 1,337 2019 - 119-

Six months ended Year ended 30 June 31 December Location Description 2019 2018 2018 2017 2016 Completion (RUB millions, except as stated)

Perm...... New DOTP production 1,111 1,614 3,798 791 564 Completed

Expansion of PTA Bashkortostan ...... production 1,808 494 2,323 1,318 433 Completed

Expansion of TPE Voronezh ...... production 893 183 1,099 352 — 2020

Maleic anhydride (MAN) Tobolsk ...... production 387 12 24 351 79 2021

Expansion of PP and Tomsk ...... LDPE production — — — — 3,321 Completed

Tobolsk ...... Second GFU expansion — — — — 2,174 Completed

Other ...... 14,934 8,286 14,514 11,175 10,503

Maintenance Maintenance ...... 7,661 2,495 11,554 7,442 5,887

Capital expenditures, total(1) ...... 67,685 70,307 151,438 135,261 145,693 Grants and subsidies received ...... (5,830) (2,378) (9,536) (11,274) (1,723) Capital expenditures net of subsidies, total ...... 61,855 67,929 141,902 123,987 143,970 ______Note: (1) Capital expenditures mean cash used for purchase of property, plant and equipment, intangible assets and non-current assets.

Capital expenditure investments for the periods under review have been incurred primarily to: expand the Group's polyolefins production capacity, primarily represented by large-scale ZapSibNeftekhim project; construct a logistics infrastructure for polymer distribution; and expanding the Group's product offering in Plastics, Elastomers and Intermediates segment in order to meet domestic demand for advanced petrochemical solutions and to leverage opportunities to substitute less competitive imports.

The Group currently expects that it will finance these capital expenditures through a combination of cash flows from operations, cash and cash equivalents and new borrowings within the limits of its financial policy.

As a major investor in infrastructure and social projects in the regions where it operates, the Group has signed cooperation agreements with a number of regional authorities, including investment and financial support agreements. Under these agreements, the Group is entitled to a partial refund of capital expenditures incurred in the respective regions subject to certain conditions. The amounts of government subsidies received in the six months ended 30 June 2019 and 2018 and the years ended 31 December 2018, 2017 and 2016 are presented in the table above.

In the first half of 2019, the Group's capital expenditures decreased by 3.7% to RUB 67,685 million from RUB 70,307 million (net of VAT) mainly due to a decrease in ZapSibNeftekhim financing, while there was an increase in expenses related to financing of smaller-scale projects and payment for the purchased catalysts.

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In 2018, the Group's capital expenditures increased by 12.0% year-on-year to RUB 151,438 million, compared to RUB 135,261 million in 2017 (net of VAT), mainly as a result of the ZapSibNeftekhim transition to the final stage of the project implementation, as well as the depreciation of the Rouble against the euro and the U.S. dollar, which affected the Group's payments denominated in these currencies.

In 2017, the Group's capital expenditures decreased by 7.2% year-on-year to RUB 135,261 million, compared to RUB 145,693 million in 2016 (net of VAT), mainly as a result of (i) appreciation of the Rouble against the euro and the U.S. dollar, which affected the Group's payments under EPC contracts denominated in these currencies, (ii) substantial advances paid in 2016 for further equipment deliveries for ZapSibNeftekhim, according to contract terms, and (iii) shifts in the payments schedule with certain amounts sliding from 2017 to 2018.

ZapSibNeftekhim

ZapSibNeftekhim is designed to operate (i) a world-scale ethylene cracking unit with an annual capacity of 1.5 million tonnes, that will also produce 525 thousand tonnes of propylene and 223 thousand tonnes of butadiene and fuel components (technology provided by Linde), and (ii) polyolefin units with an annual capacity of 1.5 million tonnes of PE (technology provided by INEOS) and 500 thousand tonnes of PP (technology provided by LyondellBasell). This is a greenfield construction near the Group's Tobolsk production site, and the facility will have direct access to the existing fractionation capacity. Positioned in the first quartile on the global IHS ethylene cost curve, ZapSibNeftekhim is expected to be one of the lowest-cost projects globally, with cost advantage driven by low feedstock price (LPG netback in Western Siberia), economy of scale, as well as low energy and labour costs in Russia.

ZapSibNeftekhim's production unit will enable the Group to nearly double its share of processed feedstock, achieve economies of scale, further strengthen its balanced business model and provide the Group with the first-mover advantage in establishing large-scale petrochemicals production capacities in Western Siberia.

As of 30 June 2019, construction and pre-commissioning works were completed at all technological and production units. As part of commissioning works during the first half of 2019, the Group produced 26.7 thousand tonnes of PP from Tobolsk propylene at PP polymerisation unit. It also produced first PE granules from PE powder supplied from the existing Tomsk site as part of a test run. The ramp-up of ZapSibNeftekhim may take from three to 12 months, in line with industry benchmarks.

ZapSibNeftekhim cumulated capital expenditures of RUB 37,945 million, RUB 54,465 million, RUB 112,369 million, RUB 106,896 million and RUB 121,395 million for the six months ended 30 June 2019 and 2018 and for the years ended 31 December 2018, 2017 and 2016, respectively. The total cumulated capital expenditures from the beginning of the project until 30 June 2019 were USD 7.4 billion3. The total residual capital expenditures for the ZapSibNeftekhim project were estimated by the Group at USD 1.5 billion4 as at 30 June 2019.

The following funding sources are available for the project:

• in December 2014, SIBUR signed an agreement with a consortium of European banks for ECA-backed long-term financing in the amount of EUR 1,575 million for the contracts with Linde AG and ThyssenKrupp Industrial Solutions; later, the amount was revised

3 Calculated using annual average RUB/USD exchange rates and average exchange rates for the first half of 2019. 4 Calculated based on the following exchange rates: RUB/USD at 65.60, RUB/EUR at 74.90. - 121-

upward to EUR 1,676 million; as of 31 December 2018, SIBUR had drawn down EUR 1,128 million from this credit facility;

• in September 2015, SIBUR signed a EUR 412 million credit facility arrangement with a consortium of European banks, which is covered by a guarantee from French credit agency Bpifrance (earlier, Coface), to raise long-term financing for a portion of the capital expenditures related to ZapSibNeftekhim; as of 31 December 2018, SIBUR had drawn down EUR 178 million from this credit facility; and

• in December 2017, ZapSibNeftekhim signed a credit facility agreement with Vnesheconombank in the amount of USD 400 million with a tenor of eight years; as of 31 December 2018, SIBUR had drawn down USD 240 million from this credit facility.

The Board of Directors has approved the 2019 capital expenditures budget in the amount of RUB 146 billion (net of VAT). These amounts represent investments into projects approved by the investment committee, and include capital expenditures to maintain the existing infrastructure as well as the capitalised portion of the Group's expenses related to R&D, organisational and IT projects and exclude investments under joint ventures, loans issued to joint ventures or acquisitions. See "Business — Capital Expenditure" for a description of the key projects that have been approved by the Group.

Borrowings

The Group's total debt was RUB 367,592 million as of 30 June 2019, RUB 332,411 million as of 31 December 2018, RUB 312,344 million as of 31 December 2017 and RUB 341,813 million as of 31 December 2016. The Group's borrowings consisted primarily of loans from international and Russian banks, as well as Eurobonds. As of 30 June 2019, all of the Group's debt was unsecured.

As of 30 June 2019, the Group's total debt increased by 10.6% as compared to 31 December 2018. This increase was related to the Group's adoption of IFRS 16 from 1 January 2019 (see "— Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16"), as well as new borrowings relating to conventional debt to fund small-scale projects and operating activity, as well as new drawdowns from credit facilities for ZapSibNeftekhim funding. As of 31 December 2018, the Group's total debt increased by 6.4% year-on-year. The increase was attributable to new drawdowns of ZapSibNeftekhim-related financing, as well as to the depreciation of the Rouble against the euro and the U.S. dollar, partially offset by the repayment of debt (excluding that related to ZapSibNeftekhim). As of 31 December 2017, the Group's total debt decreased by 8.6% as compared to as of 31 December 2016. The decrease was attributable to substantial repayment of conventional debt, partially offset by new drawdowns from ECA-backed credit facilities for ZapSibNeftekhim funding and a new Eurobond placement (six-year USD 500 million Eurobond due 2023 with 4.125% per annum coupon rate).

The Group's net debt, calculated as total debt less cash and cash equivalents, increased by 9.8% to RUB 348,667 million as of 30 June 2019 from RUB 317,628 million as of 31 December 2018 as a result of new borrowings to fund small-scale projects and operating activity. The Group's net debt increased by 20.4% to RUB 317,628 million as of 31 December 2018 from RUB 263,888 million as of 31 December 2017 following the increase in total debt and cash utilisation for the ongoing ZapSibNeftekhim construction. The Group's net debt decreased by 6.1% to RUB 263,888 million as of 31 December 2017 from RUB 281,178 million as of 31 December 2016, in line with the decrease in total debt.

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The following table presents data on the Group's total debt, cash and cash equivalents, as well as net debt position as of 30 June 2019 and 31 December 2018, 2017 and 2016:

As of As of 30 June 31 December 2019(1) 2018 2017 2016 (RUB millions) Total debt ...... 367,592 332,411 312,344 341,813 Debt excluding related to ZapSibNeftekhim ...... 98,246 86,637 139,147 182,128 ZapSibNeftekhim-related debt ...... 251,857 245,774 173,197 159,685 Lease liabilities ...... 17,489 — — — Cash and cash equivalents ...... 18,925 14,783 48,456 60,635 Net debt(2) ...... 348,667 317,628 263,888 281,178 Net Debt excluding related to ZapSibNeftekhim ...... 107,032 74,770 102,744 163,369 ZapSibNeftekhim-related Net Debt(3) ...... 241,635 242,858 161,144 117,809 ______Notes: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16". (2) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures". (3) ZapSibNeftekhim-related Net Debt is calculated as ZapSibNeftekhim-related short term and long term debt less ZapSibNeftekhim cash and cash equivalents as at the end of the reporting period.

The following table provides a summary of the Group's outstanding indebtedness by creditor as of 30 June 2019 and 31 December 2018, 2017 and 2016:

As of As of 30 June 31 December Currency Due 2019 2018 2017 2016 (RUB millions) Variable rate loans National Wealth Fund financing (ZapSibNeftekhim-related) ...... USD 2030 110,382 121,574 100,800 106,150 Deutsche Bank (ZapSibNeftekhim-related ECA) ...... EUR 2020-2029 81,697 78,380 49,096 36,391 Bank GPB ...... RUB 2023 22,000 22,000 22,000 — Alfa Bank...... RUB 2020 10,000 — — — Alfa Bank...... USD 2020 6,307 — — — Raiffeisen Bank ...... USD 2021 3,784 — — — New Development Bank (ZapSibNeftekhim-related) ...... USD 2021-2028 3,775 — — — ING Bank Group (ZapSibNeftekhim-related ECA) ...... EUR 2013-2029 2,808 2,705 2,246 2,417 Citibank ...... USD 2021 631 695 — — EUR, ING Bank Group ...... USD 2011-2021 206 285 531 767 Deutsche Bank ...... EUR 2014-2019 — 4,274 4,589 5,058 UniCredit Bank ...... EUR 2013-2019 — 253 445 618 Citibank (ZapSibNeftekhim- related ECA) ...... USD 2013-2023 — — 1,612 1,989 NPP Neftekhimia ...... RUB 2020 — — 175 825 RaiffeisenBank ...... USD 2019-2021 — — 5,760 6,043 Alfa Bank...... USD 2017 — — — 16,377 VTB Bank ...... RUB 2021 — — — 5,000 RUB, Sberbank of Russia ...... USD 2018-2021 — — — 1,415 Total variable rate loans ...... 241,590 230,166 187,254 183,050

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As of As of 30 June 31 December Currency Due 2019 2018 2017 2016 (RUB millions) Fixed rate loans Russian rouble bonds ...... RUB 2019-2021 30,000 30,000 30,000 30,000 Vnesheconombank (ZapSibNeftekhim-related) ...... USD 2021-2025 25,072 16,564 — — Credit Agricole (ZapSibNeftekhim-related ECA) ...... EUR 2019-2029 19,761 13,293 7,347 — Eurobonds 2023 ...... USD 2023 19,334 21,285 28,616 — Russian Direct Investment Fund (RDIF) (ZapSibNeftekhim- related) ...... USD 2018-2020 8,362 13,258 12,096 12,738 UniCredit Bank Group ...... RUB 2022 4,984 4,980 4,974 12,917 Monotowns Development Fund RUB 2021-2026 1,000 1,000 — — Gazprombank ...... RUB 2019 — 1,865 — — Alfa Bank...... USD 2019 — — 14,400 15,164 Sberbank of Russia ...... RUB 2020-2022 — — 1,896 20,000 Gazprom mezhregiongaz ...... RUB 2011-2018 — — 233 544 Eurobonds 2018 ...... USD 2018 — — 25,528 37,352 Bank GPB ...... RUB 2021 — — — 22,000 VTB Bank ...... RUB 2021 — — — 4,988 RaiffeisenBank ...... USD 2017 — — — 3,033 Other ...... USD 2031 — — — 27 Total fixed rate loans ...... 108,513 102,245 125,090 158,763 Total borrowings ...... 350,103 332,411 312,344 341,813

The Group aims to maintain a diversified debt portfolio while maintaining a balance of fixed and floating interest rate instruments. As of 30 June 2019 and 31 December 2018, 2017 and 2016, the Group's share of fixed rate borrowings was 31.0%, 30.8%, 40.0% and 46.4%, respectively, and the share of variable rate borrowings was 69.0%, 69.2%, 60.0% and 53.6%, respectively.

The following table provides scheduled maturities of the Group's outstanding debt as of 30 June 2019 and 31 December 2018, 2017 and 2016:

As of 30 June As of 31 December % of total % of total % of total % of total 2019 borrowings 2018 borrowings 2017 borrowings 2016 borrowings (RUB millions, except as stated) Due for repayment Within one year 33,010 9.4% 22,134 6.7% 29,846 9.5% 22,188 6.5% Between one and two years ... 42,513 12.1% 26,768 8.0% 33,021 10.6% 41,580 12.2% Between two and five years ... 96,859 27.7% 98,796 29.7% 58,336 18.7% 135,411 39.6% More than five years...... 177,721 50.8% 184,713 55.6% 191,141 61.2% 142,634 41.7% Total borrowings...... 350,103 100.0% 332,411 100.0% 312,344 100.0% 341,813 100.0%

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The following table shows the currency split of the Group's outstanding debt as of 30 June 2019, 31 December 2018, 2017 and 2016:

As of 30 June As of 31 December % of total % of total % of total % of total 2019 borrowings 2018 borrowings 2017 borrowings 2016 borrowings (RUB millions, except as stated) Denominated in: Russian rouble . 71,978 19.6% 59,844 18.0% 59,278 19.0% 97,689 28.6% Euro ...... 104,643 28.5% 99,191 29.8% 64,208 20.6% 45,157 13.2% U.S. dollar ...... 190,921 51.9% 173,376 52.2% 188,858 60.5% 198,967 58.2% Other currencies 50 — — — — — — — Total debt ...... 367,592 100% 332,411 100.0% 312,344 100.0% 341,813 100.0%

As of 30 June 2019, RUB 50 million of debt in other currencies relates to certain lease contracts denominated in yuan.

The rouble-denominated debt as a percentage of total borrowings amounted to 19.6%, 18.0%, 19.0% and 28.6% as of 30 June 2019, 31 December 2018, 2017 and 2016, respectively. The Group's weighted average interest rate on rouble-denominated borrowings was 9.0%, 9.2%, 9.3% and 10.9% as of 30 June 2019, 31 December 2018, 2017 and 2016, respectively. The Group's weighted average interest rate on U.S. dollar-denominated borrowings was 3.7%, 4.0%, 4.0% and 3.4% as of 30 June 2019, 31 December 2018, 2017 and 2016, respectively. The Group's weighted average interest rate on Euro-denominated borrowings was 1.2%, 1.1%, 1.2% and 1.0% as of 30 June 2019, 31 December 2018, 2017 and 2016, respectively.

The following table presents weighted average loan tenors of the Group's outstanding debt as of 30 June 2019, 31 December 2018, 2017 and 2016:

As of As of 30 June 31 December 2019 2018 2017 2016 WA loan tenor (years) ...... 6.3 7.1 6.9 6.8 WA debt excluding related to ZapSibNeftekhim ...... 3.0 3.1 3.1 2.7 WA ZapSibNeftekhim-related debt ...... 7.8 8.5 9.9 11.4

The following table provides the Group's key liquidity and credit ratios as of 30 June 2019, 31 December 2018, 2017 and 2016:

As of As of 30 June 31 December 2019(1) 2018 2017 2016 Total Debt/EBITDA(2) ...... 1.86x 1.65x 1.94x 2.45x Net Debt/EBITDA(2) ...... 1.76x 1.58x 1.64x 2.01x Net Debt excluding related to ZapSibNeftekhim/EBITDA .. 0.54x 0.37x 0.64x 1.17x Net Debt related to ZapSibNeftekhim(3)/EBITDA ...... 1.22x 1.21x 1.00x 0.84x EBITDA/Interest(2) ...... 10.03x 13.68x 10.12x 5.98x ______Notes: (1) As of 1 January 2019, the Group has adopted IFRS 16 which resulted in change in accounting policies for recognition of leases. For detailed description of changes, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Effect of new standards and changes in accounting policies — Adoption of IFRS 16". (2) For limitations and a description of non-IFRS measures, see "Presentation of Financial and Other Information" and "Selected Financial and Other Information — Non-IFRS Financial Measures". (3) ZapSibNeftekhim-related Net Debt is calculated as ZapSibNeftekhim-related short term and long term debt less ZapSibNeftekhim cash and cash equivalents as at the end of the reporting period.

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As of 30 June 2019, the Group's net debt to EBITDA ratio was 1.76x, an increase from 1.58x as of 31 December 2018, and the EBITDA to interest ratio was 10.03x, a decrease from 13.68x as of 31 December 2018.

As of 31 December 2018, the Group's net debt to EBITDA ratio decreased to 1.58x from 1.64x as of 31 December 2017 and EBITDA to interest ratio increased to 13.68x from 10.12x as of 31 December 2017 on the back of a lower accrued interest in 2018 due to increased capitalisation of interest related to significant advancement of the ZapSibNeftekhim project.

As of 31 December 2017, the Group's net debt to EBITDA ratio decreased to 1.64x from 2.01x as of 31 December 2016 and EBITDA to interest ratio increased to 10.12x from 5.98x as of 31 December 2016.

As of 30 June 2019, the Group had RUB 323,933 million available under its existing credit facilities denominated in Russian roubles, US dollars and euros, both short- and long-term, of which an equivalent of RUB 90,075 million was committed.

Set out below is a description of the Group's most significant borrowings outstanding as of 30 June 2019:

Long-term debt (including long-term ZapSibNeftekhim-related debt)

Long-term ZapSibNeftekhim-related debt

National Wealth Fund

In December 2015, ZapSibNeftekhim issued 15-year bonds worth USD 1,750 million to the Russian Federation Ministry of Finance. As a result, the Group received financing from Russia's National Wealth Fund for the purpose of financing of a portion of the capital expenditures related to ZapSibNeftekhim project. The final maturity of the bonds is in November 2030. The amount of bonds outstanding as of 30 June 2019 was an equivalent of RUB 110,382 million.

Deutsche Bank led consortium

In December 2014, the Group signed a EUR 1,575 million credit facility agreement with a consortium of European banks led by Deutsche Bank to raise an unsecured long-term export credit agency ("ECA") backed financing for the engineering and procurement contracts with German contractors, related to ZapSibNeftekhim project. In October 2015, the facility was increased by EUR 101 million to a total amount of EUR 1,676 million. The facility is available for drawdown in tranches until May 2020. The facility must be repaid in 20 semi-annual equal instalments starting from May 2020. The final maturity of the facility is in November 2029. As of 30 June 2019, an equivalent of RUB 81,697 million was outstanding under the facility agreement.

Vnesheconombank

In December 2017, ZapSibNeftekhim signed a credit facility agreement with Vnesheconombank in the amount of USD 400 million with a tenor of eight years. As of 30 June 2019, an equivalent of RUB 25,072 million was outstanding under the facility agreement.

Credit Agricole led consortium

In September 2015, ZapSibNeftekhim signed a EUR 412 million credit facility agreement with a consortium of European banks led by Credit Agricole CIB to raise a long-term ECA backed financing for the EP contracts with a French contractor, related to ZapSibNeftekhim project. The - 126-

facility is available for drawdown in tranches until September 2019. The facility must be repaid in 20 semi-annual equal instalments starting from September 2019. The final maturity of the facility is in May 2029. As of 30 June 2019, an equivalent of RUB 19,761 million was outstanding under the facility agreement.

RDIF-led consortium of investors

In November 2015, a consortium of investors consisting of RDIF and the leading Middle East sovereign wealth funds, provided a loan to ZapSibNeftekhim in the amount of USD 210 million for the purpose of financing the implementation of ZapSibNeftekhim project. The facility must be repaid in eight quarterly instalments starting from December 2018. The final maturity of the facility is in November 2020. As of 30 June 2019, an equivalent of RUB 8,362 million was outstanding under the facility agreement.

New Development Bank

In January 2019, ZapSibNeftekhim entered into a USD 300 million committed credit line agreement with New Development Bank. The credit line matures in 2028. As of 30 June 2019, USD 60 million was outstanding under this agreement.

Other long-term debt

Russian rouble bonds

In 2016, SIBUR issued three- and five-year bonds worth RUB 30 billion. The final maturity of the bonds is 2019 and 2020, respectively. The amount of bonds outstanding as of 30 June 2019 was RUB 30 billion.

Eurobonds 2023

On 5 October 2017, the Group issued USD 500 million 4.125% notes due 2023, listed on the Euronext Dublin. The Group used the aggregate net proceeds of the notes to finance a tender offer in respect of the Group's outstanding notes due 2018 and for general corporate purposes. In October 2018, the Group bought back approximately USD 192 million of its notes due 2018 in a tender offer. The amount of the notes due 2023 outstanding as of 30 June 2019 was RUB 19,334 million.

UniCredit Bank

In December 2015, SIBUR entered into a RUB 18 billion unsecured credit facility agreement with UniCredit Bank. The facility can be used for general corporate purposes and matures in February 2022. As of 30 June 2019, RUB 4,984 million was outstanding under the facility agreement.

Gazprombank

In December 2015, SIBUR entered into unsecured credit facility agreements for the total amount of RUB 24 billion with Bank GPB. The facilities can be used for general corporate purposes and matures in March 2023. As of 30 June 2019, RUB 22,000 million was outstanding under the facility agreement.

The Group's borrowings provide for a number of covenants, including, inter alia, maintaining certain financial ratios and restrictions on disposals and encumbrances of certain assets with certain exceptions, as well as restrictions on a change of control over the Company. No covenants have been breached by the Group under material borrowing agreements in 2016 - 2018. - 127-

Alfa Bank

In September 2014, SIBUR entered into a USD 400 million unsecured revolving credit line agreement for general corporate purposes with Alfa Bank, which was subsequently increased to USD 1 billion in January 2015. The credit line matures in December of 2025. As of 30 June 2019, USD 100 million and RUB 10,000 million were outstanding under the facility agreement.

Raiffeisen Bank

In March 2018, SIBUR entered into a USD 245 million unsecured revolving credit line with Raiffeisen Bank. As of 30 June 2019, USD 60 million was outstanding under this agreement.

Off-Balance Sheet Liabilities

The Group issued guarantees (debt service undertaking – DSU), which cover 20% of loans of RusVinyl and pledged its shares in RusVinyl as a security. The loans were received by RusVinyl under the EUR 450 million and RUB 12,085 million multi-credit facility agreement entered into on 17 June 2011 with EBRD, OAO Sberbank, ING Bank N.V., ING Belgium S.A., HSBC France, BNP Paribas and Fortis Bank N.V. as lenders for the purpose of financing the construction of a polyvinyl production facility in Kstovo, Nizhny Novgorod region. In addition to, that the Group issued a guarantee as a liquidity support undertaking (LSU). As of 31 December 2017 and until the project completion date (which is determined as achievement of targeted operating and financial performance), the amount of LSU was equal to EUR 32.5 million. After the project completion date occurred in the end of 2018, the DSU guarantee was replaced by the LSU guarantee, increased to EUR 62.5 million.

As of 30 June 2019, 31 December 2018, 31 December 2017 and 31 December 2016, the maximum credit risk exposure due to financial guarantees issued for the RusVinyl was RUB 4,489 million, RUB 4,966 million, RUB 8,093 million and RUB 8,580 million, respectively.

Quantitative and Qualitative Disclosure About Market Risk

The Group's activities are exposed to a variety of financial risks: market risk (including foreign currency exchange risk, cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group's overall risk management focuses on financial market unpredictability and seeks to minimise potential adverse effects on its financial performance. The Group focuses on managing exposure to risks that could lead to a potential loss of RUB 1 billion or more.

Financial risk management is carried out by the central finance function. The Group's treasury manages credit risks related to transactions with financial institutions and liquidity risk. Relevant business units manage credit risks related to operating activities in accordance with the Group's policies.

Foreign exchange risk

As the Group operates internationally, exports its products to Europe and Asia, and has a substantial amount of foreign currency-denominated debt, it is exposed to foreign exchange risk.

The table below summarises the Group's exposure to foreign currency exchange risk at each reporting date:

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Denominated in Other As of 31 December 2018 USD EUR currency (RUB millions) Cash and cash equivalents ...... 1,169 527 121 Trade and other receivables ...... 2,275 18,676 1,744 Contingent consideration for the sale of SIBUR-Portenergo LLC...... 467 — — Total financial assets...... 3,911 19,203 1,865 Trade and other payables ...... 14,560 39,168 1,729 Debt ...... 173,376 99,191 — Total financial liabilities ...... 187,936 138,359 1,729

Denominated in Other As of 31 December 2017 USD EUR currency (RUB millions) Cash and cash equivalents ...... 26,501 1,957 92 Trade and other receivables ...... 3,667 3,126 429 Contingent consideration for the sale of SIBUR-Portenergo LLC...... 736 — — Total financial assets...... 30,904 5,083 521 Trade and other payables ...... 5,915 26,653 1,824 Debt ...... 188,857 64,208 — Total financial liabilities ...... 194,772 90,861 1,824

Denominated in Other As of 31 December 2016 USD EUR currency (RUB millions) Cash and cash equivalents ...... 16,581 779 72 Trade and other receivables ...... 3,287 1,795 491 Contingent consideration for the sale of SIBUR-Portenergo LLC...... 719 — — Total financial assets...... 20,587 2,574 563 Trade and other payables ...... 4,695 5,955 23 Debt ...... 198,968 45,156 — Total financial liabilities ...... 203,663 51,111 23

The sensitivity analysis given in the table below reflects the hypothetical gain/loss that would occur assuming the Rouble had weakened/strengthened by 20% against the U.S. dollar and euro and that there were no changes in the securities portfolio and other variables as of 31 December 2018, 2017 and 2016, respectively.

Increase in 31 December exchange rate 2018 2017 2016 (RUB millions) Effect on profit before income tax RUB/USD ...... 20% (36,805) (32,774) (36,615) RUB/EUR ...... 20% (23,831) (17,156) (9,707)

Decrease in 31 December exchange rate 2018 2017 2016 (RUB millions) Effect on profit before income tax RUB/USD ...... 20% 36,805 32,774 36,615 RUB/EUR ...... 20% 23,831 17,156 9,707

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Cash flow and fair value interest rate risk

The Group is exposed to interest rate risk primarily due to short- and long-term debt at variable rates. Debt issued at fixed rates exposes the Group to fair value interest rate risk. As of 31 December 2018, 2017 and 2016, the Group's debt at variable rates was denominated in Russian roubles, U.S. dollars and euro. As of 31 December 2018, 2017 and 2016, the Group's interest- bearing assets were primarily comprised of loans receivable and cash deposits. The Group analyses its interest rate exposure on a regular basis. The Group's management makes financial decisions after careful consideration of various scenarios, which may include refinancing, renewing existing positions or alternative financing.

If variable interest rates were higher/lower, assuming all other variables remain constant, the Group's profit before income tax would change as follows:

Increase in 31 December floating rates by 2018 2017 2016 (RUB millions) Effect on profit before income tax RUB-denominated debt ...... 10% (171) (172) (63) USD-denominated debt ...... 10% (135) (223) (120)

Decrease in 31 December floating rates by 2018 2017 2016 (RUB millions) Effect on profit before income tax RUB-denominated debt ...... 10% 171 172 63 USD-denominated debt ...... 10% 135 223 14

Credit risk

The Group is exposed to credit risk primarily due to cash and cash equivalents, loans issued and customer credit risks. The Group deposits cash and cash equivalents only in banks that have minimal risk of default within set credit limits at the deposit date.

A large portion of the Group's receivables from domestic sales relates to large companies such as Rosneft, Gazprom Pererabotka and NOVATEK, with low credit risks. The Group's export customers are also key market players such as BOREALIS AG, SHV Gas Supply and Risk Management and Gunvor SA. The Group sells its products on export sales based on prepayments or advances received, or secures its export sales by letters of credit. The Group assesses the credit quality of its customers based on market segment, customers' financial position, its market share past experience and other relevant factors. Although economic factors affecting the Group's customers influence cash collection of the Group's accounts receivable, the Group's management assesses that there is no significant risk of loss other than bad debts provided as of 30 June 2019.

As of 30 June 2019, 31 December 2018, 2017 and 2016, the maximum credit risk exposure due to accounts receivable was RUB 67,340 million, RUB 51,984 million, RUB 28,391 million and RUB 22,129 million, respectively.

The Group estimates the fair value of its financial liabilities as a close-out amount that does not incorporate changes in credit risks.

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it does for on-balance-sheet financial instruments, through established credit approvals, risk control limits and monitoring procedures.

The table below shows the credit limit and balance of cash and cash equivalents of the Group's major counterparty groups as of the reporting date:

As of and for the six months ended 30 June 2019 Bank equity Rating Credit limit for one bank Balance (RUB millions) A+,BBB-, BB+, USD 200 million, in Major banks ...... >=25,000 BB individual cases -unlimited 18,800 Other banks ...... Not set Not set Individually set 125 Total cash and cash equivalents...... 18,925

As of and for the year ended 31 December 2018 Bank equity Rating Credit limit for one bank Balance (RUB millions) A+,BBB-, BB+, USD 200 million, in Major banks ...... >=25,000 BB individual cases -unlimited 14,675 Other banks ...... Not set Not set Individually set 108 Total cash and cash equivalents...... 14,783

As of and for the year ended 31 December 2017 Bank equity Rating Credit limit for one bank Balance (RUB millions) A+,BBB-, BB+, USD 200 million, in Major banks ...... >=25,000 BB individual cases -unlimited 48,346 Other banks ...... Not set Not set Individually set 110 Total cash and cash equivalents...... 48,456

As of and for the year ended 31 December 2016 Bank equity Rating Credit limit for one bank Balance (RUB millions) USD 200 million, in Major banks ...... >=25,000 BBB-, BB- individual cases -unlimited 60,606 Other banks ...... Not set Not set Individually set 29 Total cash and cash equivalents...... 60,635

The Group did not exceed its credit limits during the reporting periods, and the Group's management does not expect any losses resulting from these counterparties' non-performance. As of 30 June 2019, 31 December 2018, 2017 and 2016, the maximum credit risk exposure due to cash and cash equivalents was RUB 18,925 million, RUB 14,783 million, RUB 48,456 million and RUB 60,635 million, respectively.

Liquidity risk and capital risk management

The primary objectives of the Group's liquidity management policy is to ensure a strong liquidity base to fund and sustain its business operations through prudent investment decisions as well as to maintain investor, market and creditor confidence to support its business activities.

Liquidity risk management includes maintaining sufficient cash balances, available funding from an adequate amount of committed credit facilities, and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group's management maintains funding flexibility by ensuring funds availability under committed credit lines and expected cash - 131-

flows from operating activities. The Group's management monitors rolling forecasts of the Group's liquidity reserve, comprising the undrawn debt facilities and cash and cash equivalents on the basis of expected cash flow. This is carried out at the Group level on a monthly and annual basis. In addition, the Group's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet cash requirements while maintaining debt financing plans.

The table below analyses the Group's non-derivative financial liabilities in relevant maturity groupings based on the remaining period at the reporting date up to the contractual maturity date:

Less than one Between one Between two Over five year and two years and five years years (RUB millions) As of 31 December 2018 Debt ...... 35,389 38,178 124,186 217,039 Trade and other payables ...... 102,221 4,479 6,733 5,762 Total ...... 137,610 42,657 130,919 222,801 As of 31 December 2017 Debt ...... 41,949 44,601 83,950 222,096 Trade and other payables ...... 78,698 4,749 6,974 5,939 Total ...... 120,647 49,350 90,924 228,035

As of 31 December 2016 Debt ...... 39,432 57,794 163,217 165,285 Trade and other payables ...... 34,492 3,015 6,884 1,938 Total ...... 73,924 60,809 170,101 167,223

As the amounts in the table represent contractual undiscounted cash flows, they may not reconcile with those disclosed in the consolidated statement of financial position on debt and trade and other payables.

The Group monitors liquidity on the basis of the net debt to EBITDA ratio, which was calculated as net debt divided by EBITDA. Net debt is calculated as total debt less cash and cash equivalents.

EBITDA for any period means the Group's profit or loss for the period adjusted for income tax expense, finance income and expenses, share of net income/loss of joint ventures and associates, depreciation and amortisation, impairment of property, plant and equipment, profit or loss on disposal of investments and other exceptional items.

In accordance with the Group's financial policy, the Group must maintain a net debt to EBITDA ratio of no higher than 2.5x and an EBITDA to interest accrued ratio of no lower than 7x. This policy is stricter than the relevant contractual requirements by which the Group is bound. The net debt to EBITDA ratio was 1.58, 1.64 and 2.01 as of 31 December 2018, 2017 and 2016, respectively. The EBITDA to interest accrued ratio was 13.68, 10.12 and 5.98 for the years ended 31 December 2018, 2017 and 2016, respectively.

Significant Accounting Policies and Critical Accounting Estimates and Judgements

A detailed description of significant accounting policies and critical accounting estimates and judgements used in applying such policies are set out in Note 2 and Note 37 to the Annual 2018 Financial Statements and Note 2 and 3 to the Annual 2017 Financial Statements. A description of accounting policies initially applied by the Group starting from 1 January 2019 is set out in Note 27 of the Interim Financial Information.

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The preparation of consolidated IFRS financial statements requires (i) the use of certain accounting estimates which, by definition, may differ from actual results, and (ii) the Group's management to exercise judgement when applying the Group's accounting policies. Estimates and judgements are continually evaluated; revisions of estimates are recognised prospectively.

Judgements that have significant effect on the amounts recognised in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities in future financial reporting periods are presented in Note 2 to the Annual 2018 Financial Statements and Note 3 to the Annual 2017 Financial Statements.

In particular, one of the areas of accounting where such judgement is applied is the accounting of contracts on construction services provided by the Group. The Group recognises revenue for such contracts over time using the input method and applies judgement over the expected costs to be incurred until project completion. If circumstances arise that may change the original estimates of revenue (which is generally fixed in the contract with minor variable components), costs or the extent of progress toward completion, the estimates are revised. These revisions may result in increases or decreases in estimated revenues and total costs and are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by the Group's management.

In addition, receivables related to contracts on project management and construction services are subject to credit risk. In other words, although some revenue continues to be contractually bound, the customer can still refuse to pay or to pay in time. Where revenue has been recognised on a contract, but an uncertainty subsequently arises about the recoverability of the related amount due from the customer, any provision against the amount due is recognised as an expense.

New Accounting Pronouncements and Developments

Recent accounting pronouncements are described in Note 39 to the Annual 2018 Financial Statements and Note 42 to the Annual 2017 Financial Statements.

New accounting developments are described in Note 28 to the Interim Financial Statements, Note 38 to the Annual 2018 Financial Statements and Note 41 to the Annual 2017 Financial Statements.

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INDUSTRY

Set out below is a discussion of the macroeconomic environment in Russia and the industry conditions in each of the markets in which the Group operates. All data referenced below has been sourced from publicly available information. While this data has been accurately extracted, it has not been independently verified by the Company, the Issuer or the Joint Lead Managers.

Unless indicated otherwise, all information contained in this section is based on data from the IHS Markit.

The Group has three operating and reportable segments: Midstream, Olefins and Polyolefins, and Plastics, Elastomers and Intermediates.

Midstream segment is comprised of (i) gathering and processing of APG that the Group purchases from major Russian oil companies, (ii) transportation, fractionation and other processing of NGLs that the Group produces internally or purchases from major Russian oil and gas companies, and (iii) production, marketing and sales of energy products, such as natural gas, LPG and naphtha. SIBUR sells these energy products on the Russian and international markets and uses some of them as feedstock for its Olefins and Polyolefins, and Plastics, Elastomers and Intermediates segments.

SIBUR's petrochemical segments are Olefins and Polyolefins, and Plastics, Elastomers and Intermediates. Olefins and Polyolefins segment includes production of propylene and ethylene which are further used internally as a feedstock for the Group's production of basic polymers such as PP, PE and BOPP-films. Plastics, Elastomers and Intermediates segment includes production of a variety of petrochemical products, such as (i) plastics and organic synthesis products comprising PET, glycols, EPS, alcohols and acrylates, (ii) elastomers comprising various grades of commodity and speciality rubbers and TPE, (iii) MTBE and fuel additives, which are sold externally, and (iv) intermediate chemicals, which comprise benzene, styrene, PTA, propylene, ethylene oxide, butadiene, isoprene, isobutylene, ethylene and others that are primarily used within the segment, with a minor share being sold externally to the market.

Although each of these petrochemical product groups has particular characteristics and distinct market fundamentals, they share certain similar features: all of them are sold to industrial consumers, and growth in each of these product groups is driven primarily by the development of the industrial sector generally and of the key end-customer industries, including automotive, construction, FMCG, industrial machinery, chemicals and other. Mid-term and long-term growth in petrochemicals globally depends on growth in emerging markets, the speed and extent of technical modernisation and innovation in the key end markets as well as the introduction of government policies promoting the use of new advanced materials and products.

Petrochemical markets are cyclical. Typically, periods of higher market growth are followed by the periods of stagnation or decline in the market. The transition from growth to decline in the market can be very swift and can vary from region to region depending on different regional dynamics.

Petrochemical markets are also subject to significant fluctuations as they are influenced by the trends in global supply and demand, including differences in supply and demand between domestic and export markets. Demand is generally linked to economic activity, while supply is linked to the long-term investments in capacity expansion. When significant new capacity becomes available, and is not matched by the corresponding growth in demand, the average industry operating margins typically fall. At the same time, capacity expansion requires substantial lead time, and when the

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growth in demand is not matched by respective capacity expansion, the average industry operating margins typically rise.

According to IHS Markit (on the basis of Rosstat data), per capita consumption of petrochemical products in Russia is significantly lower than consumption in more developed and other emerging markets. This disparity may provide significant growth opportunities for Russian petrochemical producers.

Midstream segment

Hydrocarbon feedstock in Russia

Traditionally, the Russian petrochemical industry, which was largely built during the Soviet period, mainly used the refinery-based petroleum liquids, especially naphtha (straight-run gasoline), as the feedstock. However, a switch is taking place from the liquid-based feedstock to the gas-based feedstock in Russia, as it has been in the rest of the world. This is happening due to a major expansion driven by the several ambitious new large ethylene projects located in Western and East Siberia, that will take advantage of abundant regional NGL supplies. According to IHS Markit analysis, as a result of this change, it is expected that the distribution of basic petrochemical manufacturing globally will become more closely related to the geography of natural gas production in the future.

Although the major share of the natural gas produced in Russia, particularly in the large Cenomanian reservoirs in Western Siberia, is represented by dry or "lean" gas (which contains few or no hydrocarbons commercially recoverable as a liquid product), a considerable amount of "feedstock-rich" gas (i.e. containing lots of hydrocarbons) is also produced in Russia. Such "feedstock-rich" gas consists of two principal components:

• APG, comprised of (i) solution gas from the oil reservoirs, or (ii) gas from the gas caps of the oilfields; and

• non-associated "wet" gas.5

Associated Petroleum Gas (APG)

APG, also known as casing head gas, occurs together with crude oil, either as a cap of free gas covering the oil (cap gas) or is dissolved in the oil formation itself at reservoir conditions (solution gas). As a result of the molecular contact between the gas and the oil in the reservoir, associated gas also typically has, in addition to methane which is the principal component of natural gas, a high liquid content represented by a mix of hydrocarbons that are heavier than methane, such as ethane, propane, butane, pentane, hexane and others. APG has a very high portion of C2+ fractions (ranging from 8% to over 40% of the total volume) and there is no commercial market and reference pricing in Russia for APG. The high share of C2+ in APG makes it unsuitable for the sale in domestic or international markets through the gas pipeline infrastructure.

APG is mainly used (i) in processing at GPPs, (ii) by the oil companies for their own needs at the field (namely, for power and heat generation and compressors), (iii) for the purposes of its reinjection into the oil formations, and (iv) by the local consumers. APG can also be used for the purpose of its direct deliveries into Gazprom's Unified Gas Supply System, the trunk gas pipeline

5 Non-associated wet natural gas is referred to as "zhirnyy gaz" ("fat" or "greasy" gas) in Russian. APG produced in oilfields is referred to as "poputniy gaz" in Russian. - 135-

system ("Gazprom's UGSS"), although usually it needs to be processed first in order to get dried and meet the quality of pipeline network gas.

The key products derived from processing of APG are dry gas (which is injected mainly into Gazprom's UGSS) and different types of NGLs (i.e., hydrocarbons recovered from gas in the form of liquids). The principal liquid product produced by Russian GPPs from APG is raw NGL that consists of a broad mixture of hydrocarbons (which does not include ethane), also known as "light hydrocarbon fractions".

Russian oil companies have made a solid progress by boosting production and utilisation of their APG. According to IHS Markit, gross APG extraction increased from 65.3 billion cubic meters ("Bcm") in 2010 to 105.3 Bcm in 2018, 85.1% (or 89.6 Bcm) of which was utilised or considered to be "produced" and the remainder 14.9% (or 15.7 Bcm) was flared (due to lack of gas transportation and processing infrastructure in proximity to the producing oil fields) in 2018. However, Russia's average APG utilisation rate is still far below the target of 95% of extracted (gross) APG. As the major share of the produced APG is in Western Siberia, the bulk of Russia's APG processing capacity is also in Western Siberia, and the total number of GPPs in Russia processing APG currently exceeds twenty facilities. The Group, which owns eight out of the ten Western Siberian GPPs, processed 22.8 Bcm (including third-party volumes processed at the Group's capacities) in 2018, representing 57% of total processed APG in Russia.

The main driver of an APG extraction is crude oil production, which, according to IHS Markit, will remain fairly stable over the outlook period to 2030. In the IHS Markit base case, Russian oil production (crude oil + condensate) will increase from 555.8 million metric tonnes ("MMt") (11.24 million barrels per day ("MMb/d")) in 2018 to 565.3 MMt (11.46 MMb/d) in 2030 as a result of the planned ramp up of the several large new projects which will be more than offsetting factor to the ongoing decline in production in older oil fields. However, the near-term growth will be driven entirely by the increasing condensate output, while the crude oil production will continue to fall.

Gross APG extraction in Russia is expected to increase from 105.3 Bcm in 2018 to 110 Bcm in 2030 (increasing by 0.4% per year on average), according to IHS Markit. Western Siberia will remain the key producing region in the outlook period and is expected to demonstrate flat dynamics in volumes (during the next 10 years), however, its share in APG production is expected to decrease as compared to other Russian regions with the faster growing APG production, such as East Siberia, the Far East and the Caspian offshore. IHS Markit expects the continued progress by the Russian oil industry along the path to achieve the target APG utilisation rate of 95% of extracted (gross) APG in the coming years, but at a slower pace than according to forecasts of some of the oil companies.

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Russia's APG production and utilization outlook to 2030

120.0 100%

95% 100.0 90%

85%

Bcm 80.0 80%

60.0 75%

70% 40.0 65%

60% 20.0 55%

0.0 50% 2010 2015 2020 2025 2030

Net APG production (minus flaring) Flaring Gross APG production utilization rate in %, right-hand scale Source: IHS Markit © 2019 IHS Markit As the state regulation of APG purchase price was withdrawn in 2007, the APG purchase price in Russia is the subject to negotiation between a seller (producer) and a purchaser (consumer or APG processing company). The APG supply contracts are normally long-term (from five to ten years) and the pricing is usually linked to the regulated price of dry pipeline gas in the corresponding production region.

APG purchase contracts of SIBUR (relating to APG purchase in West Siberia) are currently based on one of the following pricing mechanisms:

• APG purchase price is directly linked to the regulated natural gas price in the production region with a discount (in the range of 70%, according to IHS Markit estimates);

• a pricing mechanism that also includes the value of the NGLs (LPG and naphtha) recovered during APG processing, in addition to the natural gas price.

Non-Associated Wet Gas (Natural Gas) and Wet Gas-based NGLs

Historically, the relatively dry Cenomanian (Upper Cretaceous) sections of the Western Siberian Basin have been providing the bulk of the natural gas production in Russia. With the gradual long- term depletion of the Cenomanian reserves overall, Gazprom and other Russian gas producers now increasingly depend on the deeper Neocomian/Valanginian (Lower Cretaceous) sections as well as the even deeper Achimov layer for incremental output. In contrast to the Cenomanian gas, which has a 97–98% portion of methane, the methane portion from deeper sections is typically no more than 75–85%. The "wet" non-Cenomanian gas contains a relatively high share of NGLs, including ethane, propane, butane, pentane and heavier hydrocarbons. According to IHS Markit, the share of wet natural gas in total gas production in Russia increased from 22% in 2010 to 30% in 2018 due to the shift by Russian gas producers to deeper sections and the depletion of traditional Cenomanian reserves. Wet natural gas production has more than doubled since the start of the current decade, from 96 Bcm in 2010 to 217 Bcm in 2018, according to IHS Markit. As a result of this shift, the total volume of wet natural gas production in Russia is projected to increase from 194 Bcm per year ("Bcm/y") in 2017 to 250 Bcm/y in 2020, and subsequently to 456 Bcm/y in 2030, according to IHS Markit.

Gas production in Russia is fundamentally driven by demand. According to IHS Markit, the Russian gas production outlook should take into account several factors, including projection on domestic market consumption, pipeline exports to Europe, CIS, and, later on, to China, and imports - 137-

from Central Asian states, as well as production and exports of Russian liquefied natural gas (LNG). The interplay of these factors is expected to lead to an overall increase of Russian natural gas production (excluding flared volumes) to 751 Bcm/y in 2020 and further to 837 Bcm/y by 2030.

After a half-decade of stagnation, Russia's gas consumption is once again on the rise, albeit modestly. According to IHS Markit, domestic (apparent) consumption increased approximately by 2.4% in 2017 and by 4.6% in 2018, with power and fertilisers leading share in domestic consumption. According to IHS Markit, going forward, gas consumption in Russia is projected to increase slowly, by 0.3% average increase per year, until 2030 (as compared to an average annual increase rate of 1.5% from 2010 to 2018).

As Gazprom is the monopolistic owner of the trunk transportation system, wholesale gas prices in the domestic market are regulated by the FAS. The price is set for standard conditions, and each Russian region has the minimum and the maximum price levels (according to Resolution of the Russian Government No. 1021 "On State Regulation of Gas Prices and Tariffs for Gas Transportation within the Territory of the Russian Federation and Payment for Technological Connection of Gas Using Equipment to Gas Distribution Networks", dated 29 December 2000, as amended ("Resolution No. 1021")); however, major sales by Gazprom are carried out at the minimum level of the regulated price in each Russian region. There are two categories of regulated wholesale prices differentiated by the type of entities to which the gas is sold: industrial consumers and residential consumers (households and municipal utilities). Prices for the latter are usually about 15-20% lower than for the industrial sector. Specific prices for these two categories are set for each Russian region. The general rule is that the further the consuming region is from the main gas-producing region (i.e., West Siberia), the higher the regulated price. Producers, other than Gazprom, are allowed to sell gas at negotiated (unregulated) prices, but negotiated market prices predominantly follow the regulated price level, albeit currently, with discounts to the regulated price within a range of 5-10% vis-à-vis the relevant regulated wholesale price in the region where the gas is sold.

LPGs

LPGs (propane and butane) are widely used in the petrochemical industry as feedstock in production of olefins (ethylene and propylene), in various types of synthetic rubber manufacture, in transportation as a relatively inexpensive motor fuel, and as a residential heating and cooking fuel substitute to network natural gas in places not connected to the pipeline grid.

LPGs are manufactured by several types of producers representing different industries and employing a variety of starting materials. The key LPG producers in Russia include GPPs, oil refineries, and petrochemical plants. The starting materials used for LPG production include associated gas, natural gas, wet NGL, and crude oil (during petroleum refining, mostly from refinery refluxes).

According to IHS Markit, gross LPG production (including in-plant consumption) in Russia has grown from 11.8 MMt per year ("MMt/y") (377,000 barrels per day ("b/d")) in 2010 to 16.96 MMt/y (543,430 b/d) in 2018. About 20% of gross production originated from oil refineries. In recent years, "petrochemical plants" (where LPGs are produced via fractionation of wet NGL or a propane-butane mix into pure fractions) have been contributing to the major increase in LPG production, and in fact the key source of this growth has been SIBUR's Tobolsk petrochemical plant, which currently has 8 MMt/y (256,000 b/d) of fractionation capacity for wet NGL. GPP share in LPG production has increased less significantly overall since 2010 as compared to the increase in share of petrochemical plants.

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According to IHS Markit, total LPG demand in Russia is expected to increase from 9.9 MMt (316,000 b/d) in 2018 to 14.3 MMt (455,000 b/d) in 2030, generally driven by the expected expansion of petrochemical consumption in Russia, and domestic production of LPGs will be more than sufficient to cover the expected increase in demand, with a sizeable surplus continuing to be available for export.

Russia exports a large share of LPG output (about one-third of the total), and domestic Russian prices have tended to align with export netbacks (the international export price minus the export duty and transportation costs). The LPG (propane-butane mix) netback is usually calculated on the basis of a price quote based at the border of Poland and Belarus (DAF Brest). Since 2010, the LPG export duty mechanism has been determined by a formula based on the DAF Brest LPG quote, increasing proportionally with this export price.

Naphtha (natural gasoline)

Natural gasoline (naphtha) is a by-product of APG processing, condensate stabilisation, or wet fractionation and is comprised mainly of C5-C6 fractions. The share of naphtha production from oil refineries and condensate splitters substantially exceeds the share of naphtha (natural gasoline) production from gas liquids processing.

According to IHS Markit, in 2018, Russia's total naphtha production (including natural gasoline) reached 26.9 MMt/y (657,140 b/d), less than 10% of which was originated from gas processing. Natural gasoline is used as a feedstock for high-octane automotive gasoline production, petrochemical manufacturing sector (pyrolysis, rubber production), production of solvents, or as a blending material.

Russia's petrochemical feedstock mix is still mainly represented by naphtha, while the world's leading (and most efficient) petrochemical producers, especially for olefins, are increasingly using NGLs (such as ethane, propane and butane) as feedstock. The main reason for the high share of naphtha in the feedstock for Russian pyrolysis (also known as steam cracking) is the historical reliance on the refinery-based gasoline fractions. Naphtha demand in Russia has historically been relatively low as compared to total production volumes in Russia; therefore, the major part of naphtha volumes are exported. According to IHS Markit, total naphtha demand increased from 4.5 MMt (110,000 b/d) in 2010 to 5.9 MMt (143,000 b/d) in 2018, while the production increased at a much quicker pace: from 17.6 MMt (429,000 b/d) to 26.9 MMt/y (657,140 b/d), respectively.

The largest share of domestic demand for naphtha is concentrated in petrochemical manufacturing sector. According to IHS Markit, in 2018, approximately 5.6 MMt (137,000 b/d) of naphtha, representing approximately 95% of total domestic demand, was consumed as petrochemical feedstock, with pyrolysis accounting for 5.0 MMt (121,000 b/d). According to IHS, new naphtha- based ethylene production capacity in Russia (e.g. launch of the first expansion phase at Nizhnekamskneftekhim (controlled by the TAIF Group) in the Volga-Urals region and, perhaps, Rosneft's FEPCO project in the Far East) will drive an increase of total naphtha consumption to 12.1 MMt (295,000 b/d) in 2030.

Russia exports a large share of produced naphtha (over 80%), and domestic Russian prices for naphtha tend to align with export netbacks (the international export price minus the export duty and transportation costs). Rail transportation costs for naphtha are relatively low so naphtha export netback (parity) value depends more on the export duty changes, which are strongly tied to the crude oil export tax via a coefficient that is revised from time to time. From 2015 to 2017, the coefficient for the naphtha export duty was reduced within the framework of the oil sector "tax programme" (See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Tax Programme"). Russian petrochemical producers that depend largely - 139-

on naphtha feedstock strongly complained about these tax changes, as the domestic naphtha price increase threatened to reduce their relative cost advantage as compared to other producers. The impact of the tax programme on naphtha feedstock economics was partly offset through the means of a negative excise tax by which the government reimburses petrochemical producers for their naphtha purchases.

Global market outlook for LPG and naphtha

LPGs

According to IHS Markit, global LPG consumption growth will continue to be led by Asia, and concentrated in the residential/commercial and chemicals sectors. The combined residential/commercial and chemical sectors accounted for approximately 77% of total global LPG demand in 2018 and will also dominate the demand growth until 2030. Rapidly rising LPG supplies in the medium term should keep LPG affordable for residential consumers in developing markets, particularly where natural gas is not yet available. The same affordability makes LPG a competitive feedstock for olefins production as compared to naphtha. The industrial LPG market tends to be constrained by competition from the alternatives, particularly LNG / natural gas.

Currently, approximately 80% of global trade of LPG is waterborne. According to IHS Markit, the share of waterborne LPG trade is going to increase, mainly due to expected growth in LPG exports from the United States to Asia. The primary overland LPG trade routes are from Russia and Kazakhstan to Ukraine, Belarus, and Europe. China and India will be the primary drivers for LPG import demand in Asia, but Southeast Asia will also continue to increase LPG import demand. Exports from North America (the United States and Canada) have dominated the changes in global LPG trade since 2010, when LPG trade patterns changed from largely regionalised to global interregional trade. This trend of LPG being widely traded across all regions should continue to be the major driver for determining relative regional pricing through at least the end of the decade, with the United States remaining the major global exporter of LPG. In the long-term, slowing oil and gas production growth from U.S. shale plays will reduce the growth of LPG exports from North America. Exports from the Middle East, the United States and Russia will have the largest influence on the global trade patterns in the long-term.

Global LPG - key producinng regions - 2018

1% 4% 6% 10%

19%

21% 6%

6% 21% Africa Far East CIS Region Indian Subcontinent Latin America Middle East North America Europe Oceania Southeast Asia

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Global LPG - key demand regions - 2018

8% 8% 0% 9%

26% 17%

8% 4% 7% 13% Africa Far East CIS Region Indian Subcontinent Latin America Middle East North America Europe Oceania Southeast Asia

Overall, global propane and butane prices will be determined primarily by propane prices in Asia, which would need to be competitive with naphtha as the feedstock for the petrochemical industry.

Global LPG prices will remain relatively low as compared to crude oil prices in the near- to midterm due to increased availability of LPG supply, mainly from the United States, the Middle East and Australia. Up to 2030, IHS expects LPG / crude oil ratios to strengthen (i.e. LPG prices are expected to increase as compared to crude oil prices) because the growth of LPG production in the United States is expected to slow, and the markets will return closer to the balance of continued residential and commercial growth in demand in Asia and Africa.

U.S. propane and butane prices will remain lower than the prices in other global markets as they will have to stay competitively priced to allow trading arbitrage opportunities to clear the surplus US markets via sales to North East Asia. However, U.S. LPG prices should move consistently with other global benchmarks, as regional price differentials are increasingly determined by the export economics.

Strong U.S. upstream development continues to bring along the rapidly growing LPG supply, making the United States the most important market driving incremental LPG supplier globally. Due to the excess supply, IHS expects LPG to be largely used as ethylene feedstock at the naphtha crackers in Asia and Europe until at least mid-2020s, when growth in base demand (e.g. residential and commercial, PDH) will gradually start to push LPG out of the steam cracking.

Both propane and butane continue their long period of ethylene cash cost favourability in 2019, and IHS expects this trend to persist through the 2019/20 winter as the U.S. production growth continues to outpace the short term demand. This will cause the LPG prices to remain low to incentivise the demand and keep the markets balanced.

The longer-term weakness in crude oil prices and gradual tightening of propane and butane markets, while the fuels demand begins to outpace the supply growth, is expected to lead to a reversal of the annualised cash cost picture after 2025. IHS expects a longer period of naphtha favourability starting from the late 2020s, with a return to only seasonal favourability for propane and butane.

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Naphtha (natural gasoline)

Naphtha demand will play an increasingly important role in the growth of petrochemical demand, and, therefore, growth in petrochemical feedstock demand will exceed the overall "light" products demand growth rates. According to IHS, Asia was the largest naphtha producer in 2018, accounting for approximately 55% of the global production. The Middle East and Asia experienced a high increase in naphtha production in the last decade due to an increase in gas production and refinery capacities.

Total global demand for naphtha was approximately 7.1 million b/d in 2018, and it has been among the fastest growing refined products with historical growth in the past decade, averaging about 2.6% annually, according to IHS Markit. A 2.2% annual average growth in naphtha demand is expected to continue until 2030. Naphtha demand includes naphtha that is used as a petrochemical feedstock or fuel, but excludes gasoline. The use of naphtha as fuel is very limited and is expected to decline, or be flat in the future. Asia Pacific accounts for approximately 71% of global naphtha demand, due to its reliance on naphtha as a primary feedstock for petrochemicals production. Other regions, such as the United States, preferentially use gas for the purposes of petrochemicals production. Northeast Asia (China, Japan, South Korea) accounts for approximately 75% of naphtha consumption in Asia Pacific. Naphtha demand in Asia Pacific is expected to increase by 2.3% annually until 2030. The development of the region's petrochemical industry until 2030 is expected to be concentrated in China, with major naphtha-based petrochemical capacity additions in that country to be expected to account for approximately 51% of Asia's increased naphtha demand during 2018-2030.

Global Naphtha - key producing regions - 2018

3% 3%

14%

8% 55% 4%

13%

North America Latin America Europe CIS Region Africa Middle East Asia Pacific

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Global Naphtha - key demand regions - 2018

3% 4%

16%

2% 1% 3%

71%

North America Latin America Europe CIS Region Africa Middle East Asia Pacific

Source: IHS Markit © 2019 IHS Markit Currently naphtha trade flows follow the petrochemical industry needs, with Asia being the net importer of approximately 1.37 million b/d from the countries outside of the region, approximately 50% of which is from the Middle East. CIS refiners are the largest alternative sources outside the Middle East. By 2030, growth in the Middle East refining capacity and continued petrochemical industry expansion in Asia is expected to lead to naphtha flows in excess of 1.3 million b/d. India will become more balanced as its demand increases. European refinery capacity rationalisations will contribute to growth in imports from Africa, and the region will start importing from the Middle East.

Asia and, notably, North East Asia, is the global price setting region for naphtha as the region is the key global demand centre for naphtha. European, Singapore and the Middle East, and European prices are based on a trade parity to Asia. In North America, the price for US Gulf Coast natural gasoline is driven by demand for diluent for heavy bitumen crude in Alberta, Canada. But this is expected to shift to a Northeast Asia netback on average, from 2025 onward, with higher expected exports to international markets.

Naphtha pricing is influenced by crude oil price, supply/demand balance of naphtha, as well as gasoline and the refining economics. Prices depend on different competing disposition routes and arbitrage economics that determine naphtha breakeven values ("BEV").

For light naphtha in Northeast Asia, BEV for gasoline blending, propane stream cracking, isomerisation and fuel value are the key drivers to naphtha prices setting, and they are impacted by arbitrage economics of light naphtha delivered to the region from other producing regions.

In case of heavy naphtha, naphtha BEV pricing is influenced by naphtha values for reforming to produce gasoline, reforming to produce aromatics, direct blending to gasoline pool, and also by arbitrage delivering heavy naphtha from other global producing and exporting regions, such as Europe and the United States. Asian heavy naphtha has been traded with a premium/discount to Asian open-specification naphtha price. European prices for heavy naphtha are influenced by the trade parity pricing from Asia, as most of the region's heavy naphtha is supplied primarily by Russia and Europe.

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Olefins and Polyolefins segment

Olefins

Olefins and aromatics are the basic building blocks for most of the petrochemical industry. The most commercially important olefins are ethylene, propylene and butadiene. Olefins are mainly produced by steam cracking hydrocarbon feedstocks, with additional production from oil refinery upgrading processes and by catalytic dehydrogenation of paraffins. Higher prices for conventional petrochemical feedstocks have driven technology development to exploit alternative feedstocks, such as coal and methane.

The proportion of ethylene, propylene and butadiene produced by a steam cracker depends on the feedstock used and the operating conditions. Recent feedstock price volatility has led to an increased flexibility in feedstock selection by steam cracker operators. Numerous steam cracker operators in Europe and Asia have invested in modifications to permit increased cracking of LPG as its pricing has become increasingly attractive as compared to naphtha.

Ethylene is mainly produced by steam cracking of hydrocarbon feedstocks, such as ethane and NGLs, including LPG and naphtha. Propylene is mainly produced as a by-product alongside ethylene in the steam cracking process, but can also be derived as a by-product of crude oil refining or produced "on-purpose" by the dehydrogenation of propane.

Petrochemicals can be produced from a variety of traditional hydrocarbon feedstock materials, including crude oil, natural gas and gas liquids, and coal. The cracker feedstock mix (ethane, LPG or naphtha) has the most significant impact on the cost position of polyolefins because feedstock represents the largest share of production cost. The feedstock mix also has direct influence on the type and quantity of monomers, which are used for production of polyolefins.

The following table represents ethylene production nameplate capacity by feedstock type for the periods indicated:

Ethylene feedstock type 2010 2018 2025 2030 (kilo-tonnes per annum) Ethane cracker ...... 24,069 35,575 50,257 51,257 Ethane/Propane cracker ...... 12,405 14,855 15,505 15,505 EPB cracker ...... 8,034 10,396 13,004 13,004 EPB/Naphtha cracker...... 31,638 38,308 50,356 50,956 Naphtha cracker ...... 36,530 37,463 42,476 42,476 Gasoil cracker ...... 29,722 32,775 40,045 40,045 Methanol to olefins ...... — 2,254 3,542 3,542 Coal to Olefins ...... 113 2,615 5,675 5,825 Other ...... 1,545 3,357 4,024 4,024 Total ...... 144,056 177,598 224,884 226,634 The following table represents propylene production nameplate capacity by feedstock type for the periods indicated:

Propylene feedstock type 2010 2018 2025 2030 (kilo-tonnes per annum) Ex Steam Cracker ...... 53,658 58,898 70,646 70,846 Ex Refinery ...... 29,287 37,247 39,188 39,188 Metathesis ...... 3,592 6,228 6,555 6,555 PDH ...... 3,677 13,623 23,638 23,638 Methanol to Olefins ...... ---- 2,430 3,940 3,940 Coal to Olefins ...... 113 2,760 6,180 6,330 Other ...... 4,142 8,795 10,212 10,212 Total ...... 94,469 129,981 160,359 160,709

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Prices throughout the petrochemical industry are strongly influenced by the price of a small set of principal feedstock types. The United States industry is mostly based on light NGLs feedstock steam cracking, primarily ethane and propane. In other regions, where naphtha is more prevalent, crude oil is the key pricing mechanism. Meanwhile, China has been developing coal as a feedstock to take advantage of abundant reserves in the country.

The following chart provides global ethylene cash cost curve for 2022 under Brent oil FOB at $69 per barrel (with Zapsib position stated explicitly):

Russian competitiveness for ethylene reflects production from a mixture of liquid and gas fed crackers and includes ZapSibNeftekhim, which will be highly cost effective based on remote NGLs feedstock at Tobolsk. This competitiveness is further enhanced under a low oil environment as the logistic costs of exporting NGL end up in a lower local value for the feedstock at the plant.

Russia, and specifically Western Siberia, enjoys access to lighter feedstock at advantageous prices compared to global price levels, and has potential to be lower than US ethane costs. Russian naphtha-based ethylene production is the most competitive non-gaseous based production, with Russia enjoying significantly lower naphtha cost as compared to any other region due to the impact of duties on the export of refined products from the country as well as the system of reverse excise tax for naphtha that is used in petrochemical operations as a feedstock for thermal racking and dehydrogenation.

Globally, the majority of propylene is produced as a by-product, mostly from steam crackers in which case it is manufactured along with ethylene or, alternatively, from a refinery. In Russia, the last major investment in propylene capacity is SIBUR's plant located in Tobolsk, which was commissioned in 2013. This is the only PDH unit in Russia. Its steam cracking accounted for 50% of propylene supply in 2018, with PDH accounting for 19%, and the remainder from fluidised catalytic cracking sources.

Of the on-purpose sources, SIBUR's PDH unit at Tobolsk has high competitiveness driven by a combination of the export duty on propane and the logistic costs needed otherwise to move the feedstock from Tobolsk to market in either Europe or Asia. This advantage is significantly higher than PDH units in either the Middle East or the United States, which have much higher feedstock pricing levels.

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Polyolefins

According to IHS, global demand for all polyolefins (PE and PP) was 175 million tonnes in 2018, an increase by 3.1% from 2017, which is slightly lower than the growth achieved in 2017. Since 2013, the demand elasticity has been greater than 1, averaging nearly 1.5 times of GDP.

Global Polyolefins Demand by Region, 2018 CIS & Baltics Africa Central Europe 2.5% 3.4% 2.3% Middle East West Europe 6.1% 11.7%

South America 4.4% Asia (excl China) 21.4%

North America 14.2%

China 34.0% Demand = 175 million

According to IHS, global capacity for all polyolefins was 199 million tonnes in 2018 (117 million metric tonnes of PE and 82 million metric tonnes of PP), an increase by 8.3 million tonnes per year in 2017. Russia accounted for less than 2% of both PE and PP global capacity in 2018.

PE consumption in Russia was approximately 1.9 million tonnes in 2018, with different trade balance across PE grades. Russia has traditionally been a modest net exporter of LDPE and net importer of HDPE. While Russia has capacity to produce LLDPE, to date, the swing units have focused on HDPE production.

Historically, consumption of polyolefins in Russia demonstrated solid growth, driven by demand in core end-markets – FMCG, construction and chemicals.

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Polyethylene (PE)

PE is the world's most widely used polymer and is produced through the polymerisation of ethylene. Based on IHS estimates, PE accounted for 62% of the world's total ethylene consumption in 2018 and, going forward, is expected to remain the largest ethylene derivative by volume. Almost all new steam crackers have PE units as the main on-site ethylene consumer. PE consumption is, in general, an indicator of economic growth and has a variety of drivers, including some very stable, and some highly cyclical sectors. PE is often classified by its density because greater density corresponds with greater material rigidity:

• LDPE is a thermoplastic polymer that is softer, more flexible and easier to process than HDPE. LDPE is mainly used for film and sheet (packaging, lamination, bags, agricultural and special applications such as tent windows);

• HDPE is mostly used in pipes for housing and industrial infrastructure, plastic bottles, packaging for consumer products and other products;

• LLDPE has basic properties similar to LDPE and both are, to a certain extent, substitutable, although LLDPE has superior strength properties as compared to LDPE.

SIBUR's subsidiary, ZapSibNefekhim is at the final stage of constructing an integrated petrochemical complex in Tobolsk, which is planned for mechanical completion in 2019. The PE plant will consist of a swing linear low/high density gas phase PE unit featuring two lines of 400,000 tonnes per year each, and an HDPE unit featuring two lines of 350,000 tonnes per year each. The PE plant will be producing monomodal, bimodal, and metallocene PE products.

HDPE

According to IHS, global capacity of HDPE production was 51.1 million tonnes per year in 2018. This capacity represented dedicated HDPE capacity and the share of swing LLDPE/HDPE capacity that was used to produce HDPE. The following chart shows distribution of global HDPE demand and capacity by region:

Global Polyethylene Capacity by Region, 2018

Central Europe CIS & Baltics Africa 2.5% West Europe 1.5% 1.5% 12.0% South America 3.6%

Middle East 19.0%

North America 22.1%

China Asia (excl China) 16.1% 21.8% Capacity = 117 million

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There are currently production facilities at four different locations across Russia, with a total nameplate capacity of approximately 1.1 million tonnes per year. The HDPE market is the second largest polyolefin market in Russia and its demand accounted for 1 million tonnes in 2018. HDPE has shown strong average growth of over 5% from 2015 to 2018. The main end-use segment for HDPE is blow moulding that represent 33% of total HDPE consumption in Russia.

According to IHS, globally, HDPE market growth is expected to slow to 3.8% in 2019, before achieving steady annual average growth of 4.0% per year to 2025. Pipes and fittings will drive HDPE market growth, while the film application will also have a strong growth.

In Russia, demand will grow at an average of 1.9% per year to 2025. Blow moulding is expected to remain the largest application of HDPE until 2025.

Russia has been a net importer of HDPE for more than a decade, and, in 2018, had a net import requirement of 120,000 tonnes. The ZapSibNeftekhim facility is due on-stream in 2020 and the new HDPE production is expected to switch Russia to a net export position. Net exports are projected by IHS to exceed 1.3 million tonnes by 2025.

LLDPE

According to IHS, global capacity of LLDPE production was 39.4 million tonnes per year in 2018. This capacity represented dedicated LLDPE capacity and the share of swing LLDPE/HDPE capacity that was used to produce LLDPE.

Global LLDPE demand was 32.3 million tonnes in 2018, representing an increase of 5.3% from 2017, with the share of film applications of 80% of total demand.

Although there is no dedicated LLDPE capacity in Russia, LLDPE can be produced in small volumes by two swing plants. Nizhnekamskneftekhim (controlled by the TAIF Group) is currently the only producer manufacturing LLDPE in Russia, and produced 168,000 tonnes of LLDPE in 2018, according to IHS Markit.

LLDPE still accounts for a relatively small proportion of the Russian market, representing 17% of total PE demand (330,000 metric tonnes in 2018).

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While in 2019 the global LLDPE demand growth is expected to slow to 3.8%, an annual average growth of 4.8% is forecasted up to 2025 by IHS. China is the largest consuming region, accounting for 33% of global demand.

IHS Markit's near term forecast for a healthy market growth is 4.8% per year to 2025, whereas in the longer term, LLDPE growth is expected to slow to around 3.9% per year between 2025 and 2030. The net trade position of Russia is expected to change significantly in the forecast, with the ZapSibNeftekhim project now under construction. According to IHS, ZapSibNeftekhim will sharply increase LLDPE output and switch the country to a solid net export position.

LDPE

According to IHS, global LDPE capacity was 26.5 million tonnes per year in 2018. Meanwhile, global LDPE demand was 23.1 million tonnes in 2018, increasing by 4.6% from 2017. Film applications accounted for 63% of demand in 2018 and are expected to be the main demand driver of LDPE demand growth.

There is currently 730,000 tonnes of LDPE capacity in Russia. SIBUR's Tomskneftekhim facility is the largest production facility of LDPE in Russia (270,000 metric tonnes per year). In 2018, the Russian LDPE market grew by 8.3% to 620,000 tonnes per year. Russia has traditionally been a modest net exporter of LDPE, with levels of net exports approximately 125,000 tonnes per year.

According to IHS Markit, global LDPE markets grew by 4.6% in 2018, and are expected to grow at an average annual rate of 2.9% to 2025. In 2018, China was the largest consuming region, accounting for 31% of global demand.

LDPE accounted for 29% of the polyethylene market in Russia in 2018. LDPE is expected to show the slowest growth among the polyolefins with a 1.5% growth rate to 2025 and is considered as a polyolefin with fading demand in Russia, according to IHS. After 2020, due to the new capacity coming onstream, Russia will become the net exporter until 2030.

Polypropylene (PP)

PP is the world's second most largely used polymer after PE and is among the fastest growing products among thermoplastics. PP is manufactured from propylene and accounted for 65% of the world's total propylene consumption in 2018, according to IHS.

PP is used for snack food packaging as well as for higher-value items, such as household appliances, electronic components and automotive parts. Furthermore, PP is extensively used in fibre applications.

Global capacity of PP production was 81.6 million tonnes per year in 2018, according to IHS. In 2018, China had the largest share of global capacity, accounting for 31%. Asia, excluding China, was the fourth largest producing region with a 11% share in PP production in 2018.

Global PP demand was 73.5 million tonnes in 2018 and is expected to grow at an average annual rate of 4.2% to 2025, according to IHS. The dominant regional market was China with 38% of global demand. In 2018 Asia, excluding China, was the second largest market with a 22.7% share in PP demand, ahead of North America and Western Europe. Injection moulding applications dominate global markets and account for 32% of demand. Injection-moulded PP includes a large variety of end uses, such as packaging, automotive applications and appliances. Fibre and film accounted for 13% and 25% of the market demand, respectively.

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PP capacity in Russia amounted to approximately 1.4 million tonnes in 2018, according to IHS. In 2018, SIBUR's share in Russia's PP production capacity was 47%. In 2018, Russia's PP demand was 1.2 million tonnes in 2018 and is expected to grow at an average annual rate of 3.0% to 2025. ZapSibNeftekhim will add 500,000 tonnes per year starting from 2019.

In 2018, Russia achieved net PP exports of 115 000 tonnes, and net exports are expected to increase 1 million tonnes by 2023.

According to IHS, currently, PP demand in Russia equates to PP consumption of approximately 8kg per capita, as compared to over 19kg and 20kg per capita PP consumption in the United States and Western Europe, respectively. China's PP consumption is approximately 20kg per capita.

Plastics, Elastomers and Intermediates segment

Plastics, Elastomers and Intermediates is a petrochemicals segment that produces a variety of petrochemical products.

Elastomers

Elastomers are used in production of different rubber goods and construction materials. Depending on the application, elastomers are divided into commodity rubbers (used for tyre manufacturing), specialty rubbers (components for oil and gas machinery and healthcare products) and TPE (components for asphalt modifiers, roofing materials, adhesives and other materials).

According to IHS, global consumption of elastomers in 2018 exceeded 14.6 million tonnes and is estimated to reach 18.8 million tonnes by 2025. Globally, China and India are the key net importers of elastomers. Russia accounted for approximately 10% of the global elastomers capacity in 2018.

Plastics and Organic Synthesis

Plastics and organic synthesis products are used as key components in a wide variety of consumer and industrial products. End-customer industries include chemicals, construction and FMCG.

Glycols

This group includes MEG, diethylene glycol, triethylene glycol and polyethylene glycol. Ethylene glycols and their derivatives play a significant role due to their function as versatile intermediates. MEG is used primarily for production of antifreeze and PET. According to IHS, Global MEG capacity exceeded 36 million tonnes in 2018, while demand reached 29 million tones and is estimated to reach 38 million by 2025.

Polyethylene terephthalate (PET)

PET is a thermoplastic polymer resin of the polyester family and is used in manufacturing of plastic bottles, film, sheets and fibres. It is produced of MEG and PTA.

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World: PET Resin Supply & Demand

50.0 100 Forecast

40.0 80

30.0 60 Rate%

20.0 40 Operating MillionMetricTons

10.0 20

0.0 0 10 12 14 16 18 20 22 24 26 28

Demand Capacity Hypo Cap Op Rate

Source: IHS Markit © 2018 IHS Markit According to IHS, Global demand for PET resin was 23 million metric tonnes in 2018, with global capacity of 27 million metric tonnes. According to IHS, global demand for PET resin is expected to grow at an average annual rate of 3.8% to 2025, reaching 29.8 million metric tonnes. Large capacity additions in Asia is expected to contribute considerably to an increase in global PET capacity in the next few years, and while demand growth is expected to be strong, driven by the bottle production, operating rates are expected to decrease.

In 2018, Russia's PET demand was 658,000 tonnes and is expected to grow at an average annual rate of 2.2% to 2025, reaching 770,000 tonnes. Bottles production is expected to be the main driver for demand. In 2018, SIBUR's capacity met 50% of the domestic PET demand, according to IHS.

Expandable polystyrene (EPS)

EPS is mainly used for production of thermo-insulating and packaging materials. In 2018, global production of EPS exceeded 6.7 million tonnes, slightly less than 50% of which (or 3.0 million tonnes) was represented by China. Global demand is expected to grow just below global GDP levels. In 2018, SIBUR enjoyed 80% of domestic market share in EPS production, according to IHS. Increase in local EPS demand is primarily driven by manufacturing of insulation panels and, to a lesser extent, by the packaging sector.

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BUSINESS

OVERVIEW

SIBUR is a leader in the Russian petrochemicals industry with a uniquely-positioned, balanced business model. As of 30 June 2019, approximately 26,500 Group employees were contributing to the success of the Group's customers in the chemical, FMCG, automotive, construction, energy and other industries in 80 countries worldwide.

In its Olefins and Polyolefins segment, the Group operates one propane dehydrogenation facility (in Tobolsk), two steam crackers facilities (in Tomsk and Kstovo), two PP and PE production facilities (in Tobolsk and Tomsk) and five BOPP-film production sites (in Central Russia and Siberia). As of 31 December 2018, the Group's polyolefins annual production capacity was 910,000 tonnes of PP and PE and 184,600 tonnes of BOPP-films per annum. Additionally, PP is produced at NPP Neftekhimia (a joint venture between the Company and Gazprom Neft) with an annual capacity of 140,700 tonnes (the Company does not consolidate production volumes of NPP Neftekhimia; however, it purchases almost all volumes produced by the joint venture), as well as at Poliom (JV of the Group and Gazprom Neft) with 218,400 tonnes per annum as of 31 December 2018. For more information, see "— Overview of Business Segments — Olefins and Polyolefins Segment — Production Sites".

In its Plastics, Elastomers and Intermediates segment, the Group operates one steam cracker, four plastic and organic synthesis production plants (manufacturing PET, glycols, EPS, alcohols and acrylates) and three elastomer production plants (for various grades of commodity and speciality rubbers and TPE) in Central Russia and Eastern Siberia. As of 31 December 2018, plastics and organic synthesis production capacity was 972,288 tonnes per annum and elastomers production capacity was 580,800 tonnes per annum. The Group's production capacity is measured on an annual basis. For more information, see "— Overview of Business Segments — Plastics, Elastomers and Intermediates Segment — Production Sites".

The Group benefits from owning and operating Russia's largest and most extensive integrated midstream asset base for processing and transportation of APG and NGLs, located primarily in Western Siberia, which is the largest oil and gas producing region in Russia and where the Group sources most of its feedstock. This infrastructure includes eight out of the 10 existing GPPs in Western Siberia (including Yuzhno-Priobskiy GPP, a joint venture between the Company and Gazprom Neft) and two GFUs (excluding the GFU of Uralorgsintez, which was divested in April 2017 but the Group has a long-term processing arrangement regarding the use of Uralorgsintez fractionaton capacity). As of 31 December 2018, the Group had an APG processing capacity of 25.4 billion cubic metres per annum (including Yuzhno-Priobskiy GPP) and a raw NGL fractionation capacity of 9.5 million tonnes per annum (including capacity of Uralorgsintez (0.9 million tonnes per annum), which was divested in April 2017; however, its capacity is used under a long-term processing arrangement). The Group's transportation infrastructure comprises a 2,712 kilometre pipeline network (including 1,643 kilometres of raw NGL pipelines, 819 kilometres of APG pipelines and 250 kilometres of natural gas pipelines). The Group's GPPs have direct links to the production facilities of major oil companies operating in Western Siberia through a network of APG transportation pipelines, a large part of which is owned by Russia's largest oil companies, while the Company owns 819 kilometres of these pipelines. The Group's infrastructure for processing and transportation of APG and NGLs provides it with advantageous access to feedstock. For more information, see "— Overview of Business Segments — Midstream Segment - 152-

— Production Sites". The Group also utilises railway transportation facilities of PTC (see "— Joint ventures and Associates — Petrochemical Transportation Company joint venture with SG- Trans").

COMPETITIVE STRENGTHS

The Group attributes its leading position and strategic advantages principally to the following competitive strengths:

A Leading Emerging Markets Petrochemical Company

The Group is a leading emerging markets petrochemical group and the largest petrochemical producer in the Russian market, according to IHS. As of 31 December 2018, the Group's polyolefins production capacity was approximately 910,000 tonnes of PP and PE, and approximately 184,600 tonnes of BOPP-films per annum; plastics and organic synthesis production capacity was approximately 972,288 tonnes per annum; and elastomers production capacity was approximately 580,800 tonnes per annum.

The Group's petrochemicals production facilities enable it to enjoy a leading market share in Russia across many of its products. As of 31 December 2018, the Group was the Russia's largest producer of PP and LDPE (according to IHS) and BOPP-films (according to Applied Market Information) in the Olefins and Polyolefins segment, and the Russia's largest producer of PET and EPS (according to Market Report Company), MEG (according to Kortes (part of Thomson Reuters)), SBR (according to Chem Courier) and SBS (according to IISRP) and the second largest producer of PBR (according to Chem Courier) in the Plastics and Elastomers segment.

In 2018, the Group's production volumes of key products in Olefins and Polyolefins segment (excluding olefins which are both used internally and sold to the market) amounted approximately to 927 thousand tonnes of PP (including 348 thousand tonnes produced at the Group's JVs' capacities), 256 thousand tonnes of PE, 335 thousand tonnes of PVC (produced at the Group's JVs' capacities) and 153 thousand tonnes of BOPP-films. Following the launch of ZapSibNeftekhim, the Group's production volumes of PP and PE are expected to increase to 1,427 thousand tonnes and 1,756 thousand tonnes per annum, respectively, starting from 2021. In 2018, the Group's production volumes of key products in Plastics, Elastomers and Intermediates segment amounted approximately to 295 thousand tonnes of PET, 269 thousand tonnes of MEG, 105 thousand tonnes of EPS, 125 thousand tonnes of SBR, 117 thousand tonnes of polybutadiene rubber ("PBR") and 79 thousand tonnes of SBS.

The Group has an established presence in core exports markets, including Europe, Turkey and China, with potential to expand further in emerging markets, allowing it to mitigate any single- market exposure risks. Overall, the Group sells its products to approximately 1,400 large customers operating in a variety of industries in more than 80 countries. In 2018 and the first half of 2019, the Group's total export sales were RUB 235.3 billion and RUB 115.7 billion, respectively, of which 76.2% and 71.1%, respectively, were in Europe, 11.1% and 14.9%, respectively, were in Asia and 10.9% and 11.0%, respectively, were in CIS (excluding Russia), with the remaining 1.8% and 3.0%, respectively, representing sales to other countries and regions.

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The Group has a well-diversified customer base, enabling it to mitigate customer concentration risks. In 2018 and the first half of 2019, the Group's 10 largest customers accounted for 26.4% and 30.0%, respectively, of the Group's revenue. As the Group's customers, industries and geographies often have different trends underlying supply and demand dynamics for the Group's products, the Group has relatively limited exposure to a single customer, industry or geography.

Operating in Growing and Diversified End Markets and Geographies

According to IHS, in 2018 PP and PE were the most widely used polymers globally, with PP accounting for 30% of the world's total polymer consumption (73 million tonnes) and PE accounting for 42% of the world's total polymer consumption (101 million tonnes). From 2012 to 2018, the global compound annual growth rate for PP and PE consumption was 5.2% and 4.4%, respectively, compared to the compound annual growth rate for global GDP of 2.9%, outperforming consumption growth of most other materials (including nickel, steel, cement, copper and zinc). IHS expects the growth of global demand for PP and PE to continue to outpace the GDP growth rate. From 2018 to 2025, IHS expects the annual growth of consumption for PP and PE to increase by four million tonnes and five million tonnes, or 4.2% and 3.9%, respectively.

According to IHS, from 2012 to 2018, the compound annual growth rate for PP and PE consumption in Asia was 7.3% and 7.3%, respectively, and from 2018 to 2025, the annual growth of consumption for PP and PE in Asia is expected to increase by 3 million tonnes and 3 million tonnes, or 5.6% and 5.5%, respectively. The Group expects that the lower PP and PE consumption per capita in Russia and certain of its export markets, including Asia and Turkey and some of the European countries, compared to the world's more developed economies (12.7kg per person in emerging markets as compared to 30.1kg per person in North America and Europe in 2018, according to IHS), supports the growth potential of these markets and that, as a result, demand for basic petrochemical products in Russia and some of the Group's export markets will grow faster than in many of the world's more developed countries, making these regions attractive markets for the Group to expand output, particularly as 86% of the population resides in emerging regions as per International Monetary Fund. If the Asian population were to increase its consumption per capita to the level of North America and Europe, this would result in upside potential of approximately 60 million metric tonnes of PE. The Group also expects import substitution policies and initiatives to provide additional medium-term growth in the Russian market for certain PP and PE products. The Group believes that it is in a leading position to displace current imports to the Russian market with its products and that this will enable the Group to increase its share of the domestic market.

Furthermore, the Group believes that the current structurally undersupplied petrochemical market in Asia will support sustainable growth in demand in the longer term. Currently, China is facing supply and demand imbalances for PP and PE products, according to IHS. As the largest global importer of high-density polyethylene ("HDPE"), Asian market has significant influence on the supply and demand dynamics for this product. According to IHS, Asian demand for HDPE exceeds its supply by 6.6 million tonnes. While over the past three decades LDPE has lost its prominence in the polyethylene resin category due to linear low-density polyethylene ("LLDPE"), single site LLDPE resins and speciality products expansion, Asian demand for LDPE still exceeds its supply by 3.3 million tonnes, according to IHS. In addition, despite substantial growth in its polyolefin production capacity in recent years, Asia is not expected to decrease its net import position due to its steadily rising demand, and net import is expected to increase from 15.5 million tonnes per annum in 2018 to 23.9 million tonnes per annum by 2025, according to IHS. The Group believes that further expansion of the production capacity of its petrochemicals business would enable it to benefit from China's supply and demand imbalances for PP and PE, resulting in sustainable export growth for the Group in the future.

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Low Cost Chemical Producer with High Barriers to Entry

The Group's key production facilities are located in Western Siberia – Russia's largest hydrocarbon region – accounting, according to IHS, for approximately two-thirds of Russian oil and gas production, 57% of total extraction volumes of APG and 80% of gas condensate in Russia. Western Siberia has one of the lowest energy costs globally (including for APG and NGLs (feedstock for midstream operations of the Group) and LPG and naphtha (key feedstocks for the Group's petrochemical business)), according to IHS, due to the abundance of hydrocarbons, limited alternative demand options available to Russian oil and gas companies and remote location from key export markets. This provides petrochemical operations in the area with a critical cost advantage (which is secured, in the Group's case, via long-term feedstock contracts), resulting in superior margins compared to global peers. As of 30 June 2019 and 31 December 2018, the Group's multi-year APG supply contracts had a weighted average maturity of 12.7 years and 13.6 years, respectively, and NGLs supply contracts had a weighted average maturity of 14.4 years and 15.4 years, respectively.

As most Russian oil companies in Western Siberia generally lack their own internal APG processing infrastructure and have limited means to utilise APG efficiently, the Group believes that its infrastructure provides it with an attractive solution to sell APG without incurring substantial capital expenditures or paying material fines for APG flaring. The Russian Government has consistently increased incentives for oil companies to utilise APG, including significantly increased penalties for flaring since 2014. For more information, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Feedstock Sourcing and Mix — Pricing".

The Group owns and operates the largest and most extensive integrated infrastructure in Russia for processing and transportation of its feedstock (APG and NGLs). The Group's midstream asset base includes eight out of the 10 existing GPPs in Western Siberia (including Yuzhno-Priobskiy GPP, a joint venture between the Group and Gazprom Neft) and two GFUs (excluding the GFU of Uralorgsintez). As of 31 December 2018, the Group had an APG processing capacity of 25.4 billion cubic metres per annum (including Yuzhno-Priobskiy GPP, the Group's JV with Gazprom Neft). The Group's transportation infrastructure comprises a 2,712 kilometre of pipeline network. In particular, the Group operates an integrated raw NGL pipeline system of 1,643 kilometres that connects most of the Group's GPPs and raw NGL suppliers to consolidate all raw NGL flows and transport NGL to the fractionation facility in Tobolsk (which GFU capacity totals 8.0 million tonnes of raw NGL per annum). The Group's GPPs have direct links to the production facilities of major oil companies operating in Western Siberia through a network of APG transportation pipelines, a large part of which is owned by Russia's largest oil companies, while the Group owns 819 kilometres of these pipelines. In 2018, the Group processed 70% of all raw NGL produced in Russia and 57% of the APG produced in Russia, according to CDU TEK and the Company's management. The Group also owns 250 kilometres of natural gas pipelines.

The Group believes that its infrastructure, combined with the Group's favourably located assets portfolio, would be very difficult for any potential competitor to replicate, resulting in significant barriers to entry, mainly due to the extensive capital expenditures and long lead times that would be required for creating similar infrastructure and asset base. There have been no other third-party gas processing additions in the region over last two decades, while the Group has doubled its processing capacities over the past 15 years and modernised legacy transportation infrastructure through its investments during that period. The Group has invested USD 4.5 billion in the expansion and upgrading of its gas processing and transportation infrastructure since 2009 in Western Siberia, to diversify its feedstock base sourced through various oil and gas fields in the region and to develop infrastructure to consolidate feedstock flows from all major oil and gas producers in the region on a competitive-price basis. The Group consistently increased its - 155-

processing capacity of APG in Western Siberia. As a result, the Group has increased its APG processing capacity from 15.3 billion tonnes per annum in 2004 to 25.4 billion tonnes per annum in 2018, expanded its raw NGL pipeline from 940 kilometres in 2004 to 1,643 kilometres in 2018 and increased its fractionation capacity from 3.0 million tonnes per annum in 2004 to 8.0 million tonnes per annum in 2018. The Group believes that in order to ensure an adequate rate of return to justify such investments, it would be uneconomical for a potential competitor to construct selective processing or transportation facilities and that a potential competitor would, instead, need to replicate a substantial part or all of the Group's infrastructure to achieve comparable economies of scale.

Significant Upside from Close-to-Completion World-Scale ZapSibNeftekhim Project

In 2014, the Group announced a new major greenfield project, ZapSibNeftekhim. Between its commencement and 30 June 2019, the Group has invested approximately USD 7.4 billion6 in this world-scale project. ZapSibNeftekhim is expected to allow the Group to triple its polyolefin production capacity to approximately three million tonnes per annum and almost double the Group's share of internally processed feedstock (mainly local LPG) in favour of significantly higher margin polyolefins.

ZapSibNeftekhim is designed to operate (i) a world-scale ethylene cracking unit with an annual capacity of 1.5 million tonnes, that will also produce 525,000 tonnes of propylene and 23,000 tonnes of butadiene and fuel components (technology provided by Linde), and (ii) polyolefin units with an annual capacity of 1.5 million tonnes of PE (technology provided by INEOS) and 500,000 tonnes of polypropylene (technology provided by LyondellBasell). ZapSibNeftekhim is located near the Group's Tobolsk production site, and the facility will have direct access to the Group's existing fractionation capacity. The construction of ZapSibNeftekhim started in early 2015. In the first half of 2019, construction and pre-commissioning works at key processing and technological units of ZapSibNeftekhim were completed and the ZapSibNeftekhim project has been proceeded to the commissioning stage. For more details on ZapSibNeftekhim status, see "— Overview of Business Segments — Olefins and Polyolefins Segment — ZapSibNeftekhim Investment Project".

Leveraging low feedstock cost in the region, the project is positioned in the first quartile on the global IHS ethylene cost curve. ZapSibNeftekhim is expected to be one of the lowest-cost projects globally with cost advantage driven by low feedstock price (LPG netback in Western Siberia), economy of scale, as well as low energy and labour costs in Russia. Post-ZapSibNeftekhim, the Group's share of the higher margin Olefins and Polyolefins segment is expected to increase in the Group's total revenue, which the Group believes will result in a significant increase in the Group's overall profitability, as evidenced by the Tobolsk PP Plant completed in 2013 and generating EBITDA margin of 49.8% and 46.0% for the six months ended 30 June 2019 and the year ended 31 December 2018, respectively, (compared to the overall Olefins and Polyolefins segment's EBITDA margin of 36.1% and 28.8% in the respective periods).

ZapSibNeftekhim is also expected to provide the Group with an additional cost advantage in the form of a transportation cost arbitrage resulting from the lower transportation cost of polyolefins

6 Calculated using annual average RUB/USD exchange rates and average exchange rates for the first half of 2019. - 156-

compared to LPG. Pre-ZapSibNeftekhim, approximately two-thirds of the Group's LPG and naphtha is sold to the market, while only approximately one-third is used internally by the Group's Olefins and Polyolefins segment and Plastics, Elastomers and Intermediates segment. LPG transportation costs are generally relatively high and are influenced by several factors, including high costs of transporting hazardous flammable liquids by train, the cost of returning the empty wagons to Russia post-delivery and the long distances to deliver the products to export markets (as Russia is a net exporter of LPG and the domestic market is oversupplied). In particular, according to IHS, average LPG selling price in Europe (LPG DAF Brest, the main destination for Russian producers) in 2018 was USD 471 per tonne, of which USD 167 per tonne was attributable to transportation costs (from Tobolsk to Brest) and USD 11 per tonne was attributable to export duties. In comparison, the cost of transporting one tonne of polyolefin from Tobolsk to China or to Central Russia is estimated at USD 100 and USD 30, respectively.7 Taking into account that 1.5 tonne of LPG is required to produce one tonne of polyolefins (reducing transportation volumes and consequently costs by 1.5 times), the production of polyolefins instead of LPG represents transportation cost and export duties savings of USD 167 and USD 237 per tonne for China and Central Russia bound products, respectively. Post-ZapSibNeftekhim, the proportion of the Group's LPG sold externally is expected to decrease to approximately one-third, thus resulting in significant cost savings.

ZapSibNeftekhim is expected to transform the Tobolsk production site into an integrated multi- asset hub ("Tobolsk hub") with a well-invested and developed infrastructure, providing optionality for further low-cost brownfield expansion in the future. Existing Tobolsk PP Plant has a total annual capacity of 500 kilo-tonnes per annum. Following the launch of ZapSibNeftekhim, the new Tobolsk hub is expected to have a total annual capacity of 2.0 million tonnes per annum and produce, in addition to the currently produced 500 kilo-tonnes per annum of PP (with an actual price of USD 1,300 per tonne in 2018, according to IHS), 1,500 kilo-tonnes per annum of PE (with an actual price of USD 1,397 per tonne in 2018, according to IHS) and 229 kilo-tonnes per annum of butadiene and fuel components (with a weighted average price of USD 854 per tonne in 20188). Additional key features of this transformation include (i) a scale-up of the polyolefin capacity, combined with more stable and easily-manageable ethylene production technology, (ii) the introduction of new grades of PE (HDPE and LLDPE), (iii) a management team experienced in construction, commissioning and running of a modern polyolefin plant and (iv) the establishment of new distribution channels, with sales teams well-prepared for further expansion.

According to IHS, ZapSibNeftekhim is expected to be one of the most cost-efficient assets to deliver to China and Western Europe. Due to the location of the Group's facilities in Tobolsk and the Group's additional logistics hub in the Kaluga Region, the Group is able to efficiently distribute products to its end customers in Russia, Turkey, China and Western Europe. For example, following the launch of ZapSibNeftekhim, the Group expects to be able to save on packaging material costs, as the Tobolsk hub is expected to optimise the Group's logistics processes for polymer products. Further, the upgraded facilities will provide the Group with a logistics platform for the storage, packaging and shipment of polyolefins. The ZapSibNeftekhim project is also expected to provide the Group with optionality for further low-cost brownfield expansion from processing ethane and dry natural gas, butadiene and other hydrocarbons.

7 Freight and railway transportation costs calculated as of March 2019, transhipment costs calculated based on tariffs published by Vostochnaya Stevedoring Company, the railway transportation costs converted into USD at the average 2018 RUB/USD exchange rate of 62.70. 8 Weighted average price for fuel components and butadiene (94 kilo-tonnes per annum of butadiene, 135 kilo-tonnes per annum of fuel components) calculated using the average 2018 exchange rate of 62.70 RUB/USD.

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Superior Margins and Resilient Cash Flow Generation Through the Cycle as Basis for Further Growth Investments

The Group's balanced business model allows it to benefit from both the oil and gas as well as petrochemical cycles, smoothing changes to the Group's cash flow and earnings volatility. The Group's flexibility in terms of both its products and its sales destinations, and ZapSibNeftekhim's favourable location between the European and Asian markets, allows the Group to capture the most attractive margins through each cycle, as the Group's balanced business model allows it to maintain a large and diversified range of products offered to various end markets and that are subject to different cycles.

In the Group's Olefins and Polyolefins segment and Plastics, Elastomers and Intermediates segment, prices for petrochemical products are partially correlated with oil and oil derivative prices and are to a large extent dependent on supply and demand fundamentals determined by cyclical factors in the petrochemicals industry as well as demand trends in the customer industries, which are influenced by the macroeconomic situation globally and in the relevant countries. At the same time, prices for a large portion of these segments' feedstock are directly or indirectly linked to oil or oil derivative prices, as crude oil prices typically influence prices for raw NGL, LPG and naphtha.

The Group's Midstream Segment's products have different sensitivities to oil and gas prices. The domestic price of natural gas has virtually no sensitivity to oil prices but is fully dependent on developments in the liberalisation of gas prices in Russia. On the other hand, the prices of LPG and naphtha are strongly correlated to oil prices.

Lower oil and oil derivative prices have a positive impact on the Group's Olefins and Polyolefins segment's and the Plastics, Elastomers and Intermediates segment's cost base as they decrease feedstock purchasing costs. This partially compensates for the effect that declines in oil and oil derivative prices have on the Group's Midstream segment.

Higher oil prices have a positive effect on the Midstream segment, which is partially compensated by negative impact on the Olefins and Polyolefins segment and the Plastics, Elastomers and Intermediaries segment. As a net seller of energy, the Group generally benefits from higher oil prices.

Furthermore, the Group benefits from a natural hedge from commodity prices and foreign exchange fluctuations. The Group's export sales are primarily denominated in U.S. dollars and, to a lesser extent, in Euro. In many cases, the Group's domestic sales are linked to international benchmark prices quoted in U.S. dollars and Euro. The Group's costs are primarily in Russian roubles. Oil prices have a significant impact on the Rouble exchange rate. Historically, in the absence of other factors, the Rouble has typically depreciated in real terms against the U.S. dollar and Euro when oil prices decrease. The negative effect of declining oil prices tends to reduce the Group's revenue due to its impact on the international prices for the Group's products, which is typically mitigated by the positive effect (in rouble terms) of the weakening Rouble on costs.

In addition, the Group's Olefins and Polyolefins segment and the Plastics, Elastomers and Intermediates segment produce a large and diversified range of petrochemical products, including propylene and ethylene, PP, PE, BOPP-films, PET, glycols, EPS, alcohols and acrylates, various grades of commodity and speciality rubbers and TPE, MTBE and fuel additives. The Group sells these petrochemical products to FMCG, chemical, automotive, construction, fuels and other industries, all of which have different demand and supply dynamics.

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The Group's diverse product portfolio and the integrated nature of its business, combined with its geographical and technological flexibility, supports the Group's profitability and resilience and enables it to change the composition of its product mix, feedstock and export destinations in response to changes in market trends and shifts in demand fundamentals to optimise purchasing, production and sales in order to support the Group's margins. As a result, from 2012 to 2018, despite volatility in global oil and gas and petrochemical products prices, the Group's average EBITDA margin was 33%, making the Group one of the most profitable companies among its global peers, according to IHS.

Strong Management and Shareholder Team with Track Record of Value Creation and Transparent Corporate Governance

The Group's management team has significant experience and expertise in the industry's different platforms, products and geographies. Committed to the Group, a majority of the members of the Board of Directors and the management team have been a part of the Group for more than 10 years, with the Chief Executive Officer of the Management Company, Mikhail Karisalov, joining the Group in 2003, and the Chairman of the Management Board of the Company, Dmitry Konov, joining the Group in 2004. In February 2018, the Company amended its charter introducing two single-member executive bodies, namely the Chairman of the Management Board of the Company (Dmitry Konov) and the Chief Executive Officer of the Management Company (Mikhail Karisalov) to separate strategic and operational management to further enhance management efficiency. The Group's management team has a proven track record of revenue growth, increasing the Group's revenue from approximately USD 4.0 billion in 2009 to approximately USD 9.1 billion in 2018 and the Group's EBITDA from USD 460 million in 2004 to USD 819 million in 2009 and to USD 3.2 billion in 2018.

Furthermore, the Group has a proven track record of completing large-scale value-accretive investment projects within budget and on time. From 2012 to 2018, the Group's management team has completed 14 large-scale projects with a total budget of RUB 210 billion. Of the 14 projects, 80% were within 10% variance from the Group's initial budget, more than 50% were below the initial budget, while all of the projects were executed on time or ahead of schedule.

Finally, the Group's management is focused on building and maintaining a socially responsible business, which includes strong focus on CO2 footprint and health and safety. Working to limit the environmental impact of its operation, the Group has reduced its environmental impact index from 7.2 in 2012 to 3.5 in 2018. In 2018, APG processing at SIBUR enterprises (including third- party volumes processed at SIBUR's capacities) was 22.8 billion cubic metres, preventing about 7 million tonnes of harmful emissions from entering the atmosphere, and 72 million tonnes of CO2 equivalent. As a result of its operations, the Group itself emits greenhouse gases. In 2018, the Group's direct greenhouse gas emissions was 6.5 million tonnes with the majority comprised by CO2. This virtually creates a negative CO2 footprint. The Group has also focused on improving its health and safety standards, reducing the Group's lost time injury frequency by more than half, from 0.98 in 2014 to 0.37 in 2018. By focusing on social responsibility, the Group seeks to improve its operations to reduce its impact on the environment and create safer working conditions for its staff.

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STRATEGY

The Group is implementing a strategy that includes the following key objectives:

Expand Core Production Base and Monetise Low-Cost Feedstock

In the Olefins and Polyolefins segment, the Group plans to monetise its access to low-cost feedstock around the Tobolsk hub, utilising the existing infrastructure and facilities to increase the share of higher value-add products in its portfolio. ZapSibNeftekhim is expected to transform the Tobolsk site into an integrated multi-asset hub and to significantly boost the production volumes of the Group's Olefins and Polyolefins segment. In addition, ZapSibNeftekhim is expected to allow the Group to introduce new higher-margin grades of PE (HDPE and LLDPE), thereby increasing the Group's overall profitability and product diversification.

In the Plastics, Elastomers and Intermediates segment, the Group intends to focus on profitable cash flow generative niches and developing new products based on the domestic market's requirements, such as, for example, propylene oxide.

Within its Midstream segment, the Group is exploring opportunities to increase its use of NGLs (which is a gas industry by-product) as feedstock in light of the growing gas condensate base in the region. The Group believes that its extensive pipeline network and technical expertise make the Group well-positioned to succeed in this effort.

Maintain Profitable Growth Beyond Core Production Base to Tap New Oil and Gas Regions with a Potential to Leverage Midstream Infrastructure Developed by Third parties

The Group is exploring various options to tap the hydrocarbon-rich regions of Russia and neighbouring countries to further capitalise on existing midstream infrastructure of third-party oil and gas companies for petrochemical production. One example of exploring this potential is the Amur GCC, located in the Amur region in close proximity to Gazprom's Amur GPP at the Russia- China border. Currently, the Group is considering two options for the project. Under first option, the Amur GCC's configuration will be based on ethane feedstock produced by Gazprom's Amur GPP and is expected to include a steam cracker with a total annual capacity of up to 1.5 million tonnes of ethylene and 1.5 million tonnes of PE. The second option assumes an increased capacity of Amur GCC by processing LPG produced at Gazprom's Amur GPP (up to 1.5 million tonnes). This second option would extend Amur GCC production capacity from 1.5 million tonnes of PE to 2.7 million tonnes of polyolefins (2.3 million tonnes of PE and 0.4 million tonnes of PP). The final project configuration is currently under consideration. The Group plans to make a final investment decision on the Amur GCC project after the completion of the extended basic design stage in 2019. See also "— Capital Expenditure — Amur Gas Chemical Complex (Amur GCC)".

Following significant growth over the past decade, the Group does not expect any material new investments in the Midstream segment.

Continuously Pursue Operational Excellence

The Group plans to continue to pursue operational excellence to enhance its cost advantages, mitigate risks and promote the long-term sustainability of its business by applying global best - 160-

practices. For example, since 2010, the Group has been implementing the production system of SIBUR (PSS) (see "— Employees — Production System of SIBUR (PSS)"). PSS's principal task is to implement a process of continuous improvement through the efforts of all of the Group's employees by using simple and straightforward tools. These tools include: standardising all processes and procedures across the Group using small management teams, visually stimulating performance via special information boards, cascading key performance indicators to all management and employee levels, and incentivising employees to make suggestions to address challenges and improve performance. To implement this programme, the Group has incorporated key inputs and drivers into the programme including research from industry experts, external consultants' recommendations, continuous re-assessments of key performance indicators and analysis of PSS results. Through PSS, the Group seeks to improve its health and safety policies and procedures, increase the utilisation rates at its facilities, reduce its energy intensity index and lower its LTIF. The Group is continuously considering other initiatives aimed at optimising and simplifying its business management and decision-making processes further in order to increase productivity.

In addition, digitisation of the Group's operations is one of its core initiatives to increase commercial and operational efficiency. The Group launched its digital transformation programme in 2017, when it established two departments whose purpose was to drive the Group's digitisation efforts. The first department, Digital Technologies, was established to develop new digital projects, while the second department, Corporate Data Management Centre, was established to leverage the Group's data. The Group is now concentrated on the three key areas for its digital projects: (i) advanced analytics; (ii) digitisation of processes; and (iii) Industry 4.0. The advanced analytics team is focused on the application of data science to improve operational efficiency and ensure quality decision-making in the Group's industrial processes. Using visualised data models and other advanced instruments like artificial intelligence and machine learning for predictive maintenance gives the Group better production control and prevention of unplanned equipment shutdowns. Overall, the Group currently has over 80 various digital initiatives at different stages of implementation, with the ambition to replicate the identified best practices across the whole organisation. The digitalisation of processes involves the simplification and optimisation of existing business and industrial processes through digital platforms in order to increase transparency, efficiency and user satisfaction. For further details, see "— Information Technology — Digitisation" below.

Form New and Develop Existing Client Relationship

In addition, the Group plans to continue to focus on direct sales and the development of longstanding relationships with its clients, through the full lifecycle of the Group's products. To that effect, the Group intends to continue to open new regional offices and hire local managers to have presence in close proximity to its customers to better address their needs and develop closer relationships. The Group also has a specialised sales and marketing team that conducts customer- driven research and development, including working with clients to develop new tailored products. Moreover, to shorten time to market and build closer ties with its customers, the Group has recently launched a new innovation centre at the Skolkovo Innovation Centre in Moscow to jointly test and develop the Group's products together with customers. At this innovation centre, the Group is planning to develop and test new materials and new product solutions, to make samples of products for subsequent testing, analysing and refining their properties, and to explore opportunities to enhance polyolefin processing technology.

Further, the Group has a dedicated team for the coverage of new customers and the development of customer relations given the upcoming launch of ZapSibNeftekhim. The Group commenced its pre-marketing activities for ZapSibNeftekhim in 2016, with key customers already having an

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established interactive model to show the customer which products will be produced, even prior to ZapSibNeftekhim's completion.

With consumer-driven R&D activities, the Group continuously works to develop tailored products and introduce new business opportunities through the development of new products and achieving sustainable environmental improvement. The Group regularly seeks to improve the operations at its production facilities, principally by improving operating efficiency, reliability and capacity. The Group's research organisation, Sibur-Tomskneftehim LLC ("NIOST") in Tomsk, is the Group's subsidiary which serves as an R&D centre for chemical technologies. NIOST is engaged in a number of projects, including development of new products and processes in the fields of polyolefins and special chemistry, polymer compounds, as well as in the area of organic synthesis.

CORPORATE STRUCTURE

SIBUR and its subsidiaries (jointly referred to as the "Group") form a vertically integrated petrochemical business. The Company is the holding company of the Group. The following chart shows the Group's key subsidiaries and joint ventures and its ownership in such entities as of the date of this Prospectus.

The Group's operations are managed through an integrated management structure out of Moscow, Tyumen, Tobolsk and Nizhny Novgorod responsible for logistics, sales and marketing, procurement and general corporate functions, including financial reporting and controlling, investment planning, project management and treasury. The management at the plant level is responsible for overseeing the facilities' production which is also overseen by the Group's Tyumen office. The Group's health, safety and environmental activities are overseen by the Group's Moscow office.

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HISTORY AND DEVELOPMENT

The timeline below sets forth key milestones in the Group's history.

1995 – 2002 OAO AK Sibur ("AK Sibur"), the Group's predecessor, was established in March 1995 on the basis of gas processing and gas fractionation assets located primarily in Western Siberia as a part of the preparation for the Russian Government's privatisation programme. As a result, AK Sibur became the shareholder in all eight GPPs then existing in Western Siberia.

AK Sibur was then privatised in several stages with operational control consolidated in the hands of private investors by the end of 1998.

In 1999 and 2000, AK Sibur pursued an active acquisition strategy and became a vertically integrated gas processing and petrochemicals company through purchases of several Russian petrochemical enterprises.

As a result of the active acquisition strategy, AK Sibur's leverage increased significantly, which led the Company into insolvency and forced it to sell in 2001 two of its eight GPPs in Western Siberia.

In 2001, OAO Gazprom acquired a controlling stake in AK Sibur.

In 2002, OAO Gazprom, as AK Sibur's major creditor, initiated a long- term restructuring programme of AK Sibur's debt through a bankruptcy procedure.

2003 – 2010 In 2003, Mr. Alexander Dyukov was appointed as a General Director of AK Sibur, and a new management team was formed. Under new management the Company has improved its operational and financial results and reached an agreement with its creditors.

In 2005, in accordance with a debt restructuring plan, AK Sibur established OAO SIBUR Holding ("SIBUR"), which consolidated all the assets of AK Sibur. A 25% interest in SIBUR was sold to OAO Gazprom, and the remainder of 75% was sold to ZAO Gazprombank, while the proceeds were used to repay the debt owed to OAO Gazprom. AK Sibur ceased to exist in 2005.

Starting from 2006, SIBUR focused predominantly on organic development and continuously invested in the expansion and modernisation of its assets to capitalise on the growth opportunities in both gas processing and petrochemical markets in Russia.

In 2006, Mr. Dmitry Konov was appointed as a General Director of the Group.

In 2007, OAO Gazprom, as part of its strategy to exit from non-core businesses, disposed of its interest in the Group by selling its 25% stake to the Non-State Pension Fund Gazfund.

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In 2007 – 2008 the Group also made selective acquisitions aimed at strengthening its positions in or entering into attractive segments of the Russian petrochemicals market, as well as at optimising its sales channels. Such transactions included the acquisition of a 50% interest in Biaxplen LLC, a BOPP-film producer, 100% in OOO Novatek- Polymer, also a BOPP-film producer (now part of Biaxplen LLC), a 50% interest in NPP Neftekhimia, a PP producer (a 50/50 joint venture with the Gazprom Neft Group) and 100% in Citco Waren- Handelsgesellschaft m.b.H., an export trading firm (later renamed SIBUR International GmbH).

In 2008, Gazprombank launched a disposal of its 75% stake in the Group to the management as a part of the MBO (management buy-out) transaction. However, the sale was not completed due to the unavailability of the MBO financing.

2011 – 2017 Between November 2010 and November 2011, through a series of transactions, Mr. Leonid Mikhelson, the CEO, founder and majority shareholder of NOVATEK and a group of affiliate investors acquired 100% of SIBUR's share capital from the previous owners, the non-state pension fund Gazfund and OAO Gazprombank.

Since 2011, in line with the Group's objectives to focus on core strategy and streamline its asset structure, SIBUR completed a number of selective divestments.

Further, in accordance with its strategy, the Group has conducted several acquisitions and has entered into multiple joint ventures and supply agreements to continue the growth of its core segments.

In 2013, SIBUR completed construction and launched a new, world- class polypropylene (PP) plant in Tobolsk (previously named Tobolsk- Polymer), one of the largest PP facilities globally and No. 1 in CIS. The plant with capacity of 500 kilo-tonnes per annum of PP significantly increased the Group's polyolefins production capacity. This was an important milestone in implementation of SIBUR's strategy, focused on monetising growing feedstock supply through petrochemicals production and capturing high-growth potential of the petrochemicals markets in Russia/CIS and overseas. The location of the plant in Tobolsk, Western Siberia, in close proximity to SIBUR's core feedstock processing centre, allowed the Group, to capitalise on attractive pricing of the feedstock in the region, as well as to benefit from the infrastructural synergies with the existing production site. The Group's access to attractively-priced feedstock, large scale of the PP plant and its strategic location allowed the project to deliver superior economics (vs. SIBUR's legacy petrochemicals production assets). The PP production site in Tobolsk reached above 90% utilization rate in 2016.

In 2014, SIBUR made a final investment decision to proceed with ZapSibNeftekhim, the cornerstone of the Group's current investment programme. The project envisages greenfield construction of a new, world-class petrochemical complex in Tobolsk, within SIBUR's petrochemical hub, that will include an ethylene cracker with capacity - 164-

of 1.5 million tonnes per annum and polyolefins production (capacity PE – 1.5 million tonnes per annum and PP – 0.5 million tonnes per annum). The construction started in 2015. The project's mechanical completion of the construction is for 2019.

In December 2015, Sinopec (China), a major global energy and chemicals company, acquired a 10% stake in SIBUR from its shareholders. In January 2017, the Silk Road Fund (SRF), a Chinese investment fund, acquired a 10% stake in SIBUR from its shareholders.

Also, as a result of several transactions in 2012-2017 at various shareholder layers of the Group, Mr. Timchenko became the beneficial owner of 17% of the Group's shares, while the equity interest of Mr. Mikhelson decreased to 48.48% of the Group's share capital.

In October 2017, SIBUR placed a USD 500 million Eurobond issue maturing in 2023. The coupon rate was set at 4.125% per annum payable semi-annually. The previous USD 1 billion five-year Eurobond issue was partly bought back following the tender offers placed in September 2017 and December 2017 and redeemed in full on its maturity date in January 2018.

2018 – present time In January 2018, Moody's assigned a Baa3 long-term issuer rating to SIBUR, with a stable outlook, thus moving SIBUR to investment-grade category.

In April 2018, Fitch revised its outlook for SIBUR's Long-Term Issuer Default Rating (IDR) to Positive from Negative, and the rating itself was affirmed at BB+.

In April 2018, the Company's shareholders approved the expansion of the Board of Directors to 12 members, including four independent directors. Independent directors chair the Audit Committee and the Human Resources and Remuneration Committee.

In May 2018, SIBUR and Gazprom signed a final agreement to supply ethane from Gazprom's Amur GPP to the Amur GCC. The deal has secured long-term ethane fraction sales for Gazprom, while SIBUR is now able to continue developing the Amur GCC project.

In September 2018, it was announced that SIBUR's Voronezh site will boost the output of TPE by 50 kilo-tonnes per annum (with the current TPE output of 85 kilo-tonnes per annum, total design capacity of Voronezh site is set to increase to 135 kilo-tonnes per annum).

In October 2018, the Group and SG-Trans, one of the country's major railway operators, set up PTC, a transportation joint venture. As part of the deal, the Group sold its LPG tank car fleet worth RUB 9.5 billion to PTC via a leasing company. The JV was set up with a parity ownership split between the Group and SG-Trans. While reserving part of PTC's transportation capacity for the Group's own needs, the deal also provides

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the JV with the ability to offer freight transportation services to third parties.

In October 2018, SIBUR successfully executed the tender offer to purchase part of the USD 500 million Eurobond notes issued in October 2017 and maturing in 2023 with a coupon rate of 4.125% per annum.

In December 2018, SIBUR launched the construction of a maleic anhydride ("MAN") production facility at the Tobolsk site. With a planned capacity of 45 kilo-tonnes per annum, the facility is scheduled to go online in 2021. MAN is used in the construction, agriculture, automotive, paint and varnish, furniture, pharmaceutical and other industries. MAN is currently not produced in Russia and domestic demand is covered by imports.

In March 2019, the Company revised its dividend policy for the period starting from 2019, increasing dividend payouts from 25% of net profit to the level of not less than 35% of adjusted net profit. In accordance with the Company's dividend policy, on 6 September 2019 the General Shareholders' Meeting of the Company approved payment of dividends in the amount of RUB 16,774 million.

In March 2019, a new eco-friendly dioctyl terephthalate plasticiser (DOTP) facility at the Group's Perm site with an annual nameplate capacity of 100 kilo-tonnes per annum made first shipments to customers as part of testing production.

In June 2019, Fitch Ratings upgraded SIBUR to BBB- from BB+ with stable outlook.

In June 2019, SIBUR and Sinopec signed a distribution agreement to supply PE to China from the Group's ZapSibNeftekhim plant.

In June 2019, SIBUR and Sinopec signed a term sheet regulating key principals of a potential joint venture for development and operations of the Amur GCC. Subject to SIBUR's final investment decision and regulatory clearances, Sinopec is expected to participate at a 40% share stake in this joint venture.

In July 2019, SIBUR and Gazprom Neft have consolidated 100% of the authorised capital in Poliom, a polypropylene plant in Omsk. Sibgazpolimer, a joint venture of the two companies, has signed an agreement to acquire a 50% stake in Poliom from the Titan Group.

In August 2019, SIBUR completed reconstruction of PTA production facility at Blagoveschensk production site and increased nameplate capacity by 80 kilo-tonnes per annum up to 350 kilo-tonnes per annum (for further details on this project, see " — Capital Expenditure — Pure terephthalic acid (PTA) production upgrade at Polief").

In August 2019, S&P has assigned SIBUR its long-term issuer credit 'BBB-' rating. The outlook is stable.

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In September 2019, SIBUR and Tatneft signed a letter of intent with respect to Togliatti-based petrochemical facilities. Under the deal, SIBUR plans to sell SIBUR Togliatti and JSC Togliattisintez legal entities to Tatneft. The deal is expected to be closed by the end of 2019.

In September 2019, the Group and Gazprom entered into a preliminary agreement setting out the key commercial terms for the supply of LPG from Gazprom's Amur GPP to Amur GCC. According to the preliminary agreement, Gazprom will supply 1.5 million tonnes per annum of LPG and ethane fraction to the Amur GCC at formula-based prices.

OPERATING RESULTS

The following table presents the Group's key operational measures for the periods indicated:

External sales volumes Olefins and Polyolefins ...... 610 1,240 1,178 1,092 Plastics, Elastomers and Intermediates ...... 1,154 2,446 2,446 2,350

The following map provides information on the location of the Group's principal production sites:

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OVERVIEW OF BUSINESS SEGMENTS

The Group subdivides its operations into three operating and reportable segments:

• the Olefins and Polyolefins segment – producing olefins represented by propylene and ethylene produced at sites in Kstovo, Tomsk and Tobolsk, as well as PP, PE and BOPP- films;

• the Plastics, Elastomers and Intermediates segment – producing elastomers, plastics and organic synthesis products represented by PET, glycols, EPS, alcohols and acrylates and other intermediate products, including butadiene, isoprene, isobutylene, propylene, ethylene oxide, ethylene, benzene, styrene, PTA and others. In addition, the Plastics, Elastomers and Intermediates segment produces fuel additives, including MTBE, 100% of which is sold externally; and

• the Midstream segment – processing of APG and raw NGLs to produce energy products, including natural gas, LPG and naphtha, which are used as feedstock by the Olefins and Polyolefins segment and the Plastics, Elastomers and Intermediates segment and are sold externally.

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Definitions: ▪ APG is a by-product of oil production. ▪ NGLs include raw NGL, LPG and naphtha. Raw NGL is a by-product of gas production. ▪ Feedstock includes LPG, naphtha and raw NGL. Composition may vary from year to year depending on market conditions and other limitations. Notes: Represented scheme includes LPG and naphtha purchased from third parties for resale, as well as certain LPG and naphtha volumes produced directly from APG processing. (1) Capacity additions estimates of the Company of 500 kilo-tonnes for PP, 1,500 kilo-tonnes for PE. (2) JV sales include share of PVC, caustic soda (RusVinyl) and PP (Poliom) sales. (3) Other revenue for the year ended 31 December 2018 (not indicated on the graph) – RUB 57 billion.

Olefins and Polyolefins Segment

The Group's Olefins and Polyolefins segment produces polyolefins, such as PP and PE, BOPP- films and olefins comprising propylene and ethylene, which are used internally by the Group's petrochemicals segments and sold externally. Olefin external sales primarily relate to sales of ethylene to RusVinyl, and propylene is transferred to the Plastics, Elastomers and Intermediates segment to market this product.

The Olefins and Polyolefins segment's sales accounted for 18.4% of the Group's total external revenues in the six months ended 30 June 2019 and 17.7%, 19.4% and 21.1% of the Group's total external revenues in the years ended 31 December 2018, 2017 and 2016, respectively. The Group's total external revenue and sales volumes for the Olefins and Polyolefins segment has grown from RUB 14 billion and 0.5 million tonnes, respectively, in 2009 to RUB 31 billion and 0.6 million tonnes, respectively, in 2013, and further to RUB 101 billion and 1.2 million tonnes, respectively, in 2018. Following the completion of ZapSibNeftekhim, the relative contribution of this segment to the Group's revenues is expected to increase significantly as the sales volumes of Olefins and Polyolefins segment are expected to increase to approximately 3.2 million tonnes per annum.

As of 31 December 2018, sales in Russia accounted for 69% of total external revenue from Olefins and Polyolefins sales, while sales in Europe, Asia and CIS accounted for 31%.

The Olefins and Polyolefins segment supplies its products to approximately 850 customers. After the launch of ZapSibNeftekhim, the number of customers is expected to increase.

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Olefins (Ethylene)

Olefins comprise propylene and ethylene, which are used internally by the Group's petrochemicals segments and sold externally. Ethylene is used for ethylene oxide and its derivatives while propylene is used for butyl alcohols, 2EH alcohols, PE and PVC.

Polypropylene (PP)

PP is a granulated thermoplastic polymer with geometrically identical granules. PP is used as a feedstock in the manufacturing of general-purpose consumer goods, various packaging, BOPP- films, hygiene products, pipes, fibres and automotive components.

The Group produces PP through polymerisation of propylene, which is an intermediate petrochemical product also produced by the Group. The Group sells PP, together with other polymers, to customers in the FMCG and construction industries in Russia and abroad. The Group also uses a certain amount of this product for further processing into other petrochemicals. In 2018, the Group's capacity of PP accounted for 47% of Russia's PP capacity, according to IHS. In addition, SIBUR has a 50% interest in NPP Neftekhimiya, SIBUR's joint venture with the Gazprom Neft Group, and 50% in Poliom, a wholly-owned subsidiary of Sibgazpolimer JSC, which is in turn a 50/50 joint venture of the Group with Gazprom Neft.

Polyethylene (PE) (LDPE)

PE is a granulated thermoplastic polymer with geometrically identical granules, which is softer, more flexible and easier to process than high-density polyethylene. PE is used as a feedstock in manufacturing general-purpose consumer goods, coating materials for the electrotechnical and energy industry, film for the agricultural industry, cable insulation as well as various packaging.

The Group produces PE from polymerisation of ethylene, which is also an intermediate petrochemical product produced by the Group. In the same way as with PP, the Group sells PE to customers in the FMCG, construction and chemicals industries in Russia and abroad. In 2018 the Group's capacity of LDPE accounted for 37% of LDPE capacity in Russia, according to IHS.

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Biaxially Oriented PP Films (BOPP-Films)

BOPP-films include coextruded, coated, non-heat sealable or homopolymer films in a variety of finishes. BOPP-films are characterised by the following properties: better shrinkage, stiffness, transparency, sealability, twist retention and barrier. BOPP-films are mainly used by the retail industry for packaging and production of price tags and labels and adhesive tapes.

Production Sites

The following table sets forth a summary of the Group's Olefins and Polyolefins segment's production sites:

Nameplate capacity (tonnes per annum) As of 31 December Commissioning date/date of latest Share of the Products Production site Location 2018 2017 2016 modernisation Group's ownership

Ethylene SIBUR-Kstovo ...... Nizhny Novgorod region ...... 384,000 384,000 372,000 1981/2014 100% Tomskneftekhim ...... Tomsk ...... 300,000 300,000 300,000 1993 100% Subtotal ...... 684,000 684,000 672,000 — —

Propylene SIBUR Tobolsk ...... Tobolsk ...... 510,000 510,000 510,000 2013 100% SIBUR-Kstovo ...... Nizhny Novgorod region ...... 180,000 180,000 180,000 1981/2014 100% Tomskneftekhim ...... Tomsk ...... 139,000 139,000 139,000 1993 100% Subtotal ...... 829,000 829,000 829,000 — —

PE (LDPE) Tomskneftekhim ...... Tomsk ...... 270,000 270,000 270,000 1994/2016 100% Subtotal ...... 270,000 270,000 270,000 — —

PP SIBUR Tobolsk ...... Tobolsk ...... 500,000 500,000 500,000 2013 100% Tomskneftekhim ...... Tomsk ...... 140,000 140,000 140,000 1981/2015 100% NPP Neftekhimia (non-consolidated JV)(2) ...... Moscow ...... 140,700 130,000 120,000 1995 50% Poliom (non-consolidated JV)(3) ...... Omsk ...... 218,400 210,000 210,000 2014 25% Subtotal ...... 999,100 980,000 970,000 — —

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Nameplate capacity (tonnes per annum) As of 31 December Commissioning date/date of latest Share of the Products Production site Location 2018 2017 2016 modernisation Group's ownership

BOPP-films Samara region, Moscow region, Kursk, Nizhny BIAXPLEN group of companies .... Novgorod region ...... 184,600 184,600 184,600 2005/2016 100% Subtotal ...... 184,600 184,600 184,600 — —

PVC RusVinyl (non-consolidated JV)(1) .. Nizhny Novgorod region ...... 330,000 330,000 330,000 2014 50% Subtotal ...... 330,000 330,000 330,000 — —

Caustic soda RusVinyl (non-consolidated JV)(1) .. Nizhny Novgorod region ...... 225,000 225,000 225,000 2014 50% Subtotal ...... 225,000 225,000 225,000

Benzene SIBUR-Kstovo ...... Nizhny Novgorod region ...... 96,000 96,000 96,000 1981/2014 100% Subtotal ...... 96,000 96,000 96,000 — — ______Notes: (1) RusVinyl is the Group's joint venture with SolVin. (2) NPP Neftekhimia is the Group's joint venture with the Gazprom Neft Group. The Group does not consolidate production volumes of NPP Neftekhimia, however it purchases almost all PP produced by the joint venture. (3) Poliom is a wholly-owned subsidiary of Sibgazpolimer, which is in turn a 50/50 joint venture between the Group and Gazprom Neft.

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The chart below sets forth average achieved utilisation capacity rates for the Olefins and Polyolefins segment's processing and production sites and their respective products:

As of 31 December Products Production site 2018 2017 2016

Ethylene SIBUR-Kstovo ...... 101% 100% 101% Tomskneftekhim ...... 87% 93% 85%

Propylene SIBUR Tobolsk ...... 75% 97% 90% SIBUR-Kstovo ...... 99% 96% 92% Tomskneftekhim ...... 102% 113% 97%

PVC RusVinyl (non-consolidated JV)(4) ...... 102% 95% 93%

Caustic soda RusVinyl (non-consolidated JV)(4) ...... 97% 92% 89%

PE (LDPE) Tomskneftekhim ...... 95% 101% 97%

PP SIBUR Tobolsk ...... 88% 102% 93% Tomskneftekhim ...... 100% 101% 93% NPP Neftekhimia (non-consolidated JV)(2)...... 103% 81% 109% Poliom (non-consolidated JV)(3) ...... 98% 98% 97%

BOPP-films BIAXPLEN group of companies ...... 83% 84% 86%

Benzene SIBUR-Kstovo ...... 77% 81% 77% ______Notes: (1) NPP Neftekhimia is the Group's joint venture with the Gazprom Neft Group. The Group does not consolidate production volumes of NPP Neftekhimia, however it purchases almost all PP produced by the joint venture. (2) Poliom is a wholly-owned subsidiary of Sibgazpolimer, which is in turn a 50/50 joint venture between the Group and Gazprom Neft. (3) RusVinyl is the Group's joint venture with SolVin.

For discussion of factors affecting the Group's production sites' capacity utilisation, see "— Midstream Segment — Production Sites".

Sales Volumes

The following table presents data on production, purchases and sales volumes of the Olefins and Polyolefins segment products for the periods indicated:

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (tonnes, except as stated) Production ...... 1,268,171 2,339,195 2,557,919 2,378,871 PP ...... 340,020 578,658 652,047 592,911 PE (LDPE) ...... 132,480 256,298 272,873 246,007 BOPP-films ...... 76,435 152,757 155,031 159,510 Ethylene ...... 329,378 651,991 655,333 624,160 Propylene ...... 389,858 699,492 822,636 756,283 Transfers from PE&I ...... 40,585 84,394 7,366 10,635 Purchases from third parties ...... 78,712 153,723 117,248 135,316 Total production, transfers and purchases ...... 1,387,468 2,577,312 2,682,534 2,524,822 (Internal use)(1) ...... (577,276) (1,020,675) (1,126,238) (1,056,711) - 173-

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (tonnes, except as stated) (Increase) / decrease in stock ...... (60,830) 15,727 (7,191) (19,556) Gross sales, including ...... 749,363 1,572,364 1,549,105 1,448,555 Intercompany sales to PE&I ...... 139,841 332,600 370,730 356,793 External sales PP ...... 280,041 583,242 598,019 539,242 Domestic ...... 204,430 377,409 349,669 308,965 Export ...... 75,612 205,833 248,350 230,277 PE (LDPE) ...... 130,612 262,311 268,480 237,956 Domestic ...... 81,098 162,657 171,201 180,155 Export ...... 49,514 99,654 97,279 57,801 BOPP-films...... 77,000 152,049 155,909 159,095 Domestic ...... 48,991 97,388 104,263 105,417 Export ...... 28,009 54,661 51,646 53,679 Ethylene ...... 81,283 157,767 148,600 144,835 Domestic ...... 81,283 157,767 148,600 144,835 Export ...... — — — — Other polymer products ...... 40,585 84,394 7,366 10,635 Domestic ...... 37,042 69,913 5,091 9,844 Export ...... 3,543 14,481 2,276 791 External sales volumes ...... 609,522 1,239,764 1,178,375 1,091,762 Domestic ...... 452,843 865,134 778,824 749,215 Export ...... 156,679 374,629 399,551 342,547 ______Note: (1) Includes internal use at the segment's production facilities and immaterial natural losses.

ZapSibNeftekhim Investment Project

In 2014, the Group announced a new major world-scale greenfield project, ZapSibNeftekhim. ZapSibNeftekhim is expected to allow the Group to triple its polyolefin production capacity to approximately 3 million tonnes per annum and almost double the Group's share of internally processed feedstock, further internalising the Group's ample own feedstock base.

ZapSibNeftekhim is designed to operate (i) a world-scale ethylene cracking unit with an annual capacity of 1.5 million tonnes, that will also produce 525,000 tonnes of propylene and 23,000 tonnes of butadiene and fuel components (technology provided by Linde), and (ii) polyolefin units with an annual capacity of 1.5 million tonnes of PE (technology provided by INEOS) and 500,000 tonnes of polypropylene (technology provided by LyondellBasell). This is a greenfield construction near the Group's Tobolsk production site, and the facility will have direct access to the existing infrastructure of the Group's petrochemicals hub and feedstock supplies in Western Siberia. As of 30 June 2019, the Group's petrochemical facilities can only process one-third of the available LPG and naphtha into higher margin petrochemicals. With ZapSibNeftekhim, the Group plans to take advantage of the opportunity to monetise the abundant LPG that is currently sold for export and leverage the transportation arbitrage and spread between polyolefins over LPG to boost its EBITDA margin potential. Once the ZapSibNeftekhim project is completed the Group is expected to nearly double its share of LPG and naphtha as feedstock for petrochemicals. It will also enable the introduction of new grades of polyethylene (HDPE and LLDPE), providing the Group with access to new market segments.

As of 30 June 2019, construction and pre-commissioning works were completed at all technological and production units. As part of commissioning works during the first half of 2019 the Group produced 26.7 thousand tonnes of polypropylene (PP) from Tobolsk propylene at PP polymerisation unit. It also produced first PE granules from PE powder supplied from the existing - 174-

Tomsk site as part of a test run. The ramp-up of ZapSibNeftekhim may take from three to 12 months, in line with industry benchmarks.

The total investment budget for the ZapSibNeftekhim project has been revised downwards from USD 9.5 billion to approximately USD 8.9 billion as of 30 June 2019.9 The Group already invested USD 7.4 billion10 as of 30 June 2019, with the residual capital expenditures estimated to be around USD 1.5 billion11.

The Group believes that the investment will enable the Group to achieve economies of scale, further strengthen its balanced business model and provide the Group with the first-mover advantage in establishing large-scale petrochemicals production capacities in Western Siberia. Further expected advantages include the development of a more balanced business model through the reduction of exposure to the volatile global energy markets, meeting the growing demand for polyolefins both in Russia and internationally, capitalising on the Group's global cost advantage and increasing the Group's overall sales geography diversification. In terms of impact on other segments, ZapSibNeftekhim is expected to reduce Midstream external sales, but increase internal sales with no impact on Midstream EBITDA, as all intersegment flows are priced at market level and arm's length basis.

Production of high value-added products leveraged on low feedstock costs in the region

High transportation costs of the Group's LPG exports lead to low netback prices of LPG in Tobolsk. The project captures the logistic arbitrage between the transportation costs of LPG and polyolefins. The average transportation cost of one tonne of LPG delivered to Europe is about USD 178/tonne compared with the average transportation cost of polyolefins delivered to China and Central part of Russia of USD 100 and USD 30/tonne, respectively.12 The difference, if adjusted to industry average conversion rate of LPG into polyolefins, would translate into economic benefit of USD 167 and USD 237 per tonne of polyolefin delivered to China and Central part of Russia, respectively. Due in large part to low feedstock cost in the region, the Gorup's management expects that ZapSibNeftekhim will be positioned in the lowest quartile of the global ethylene cash cost curve.

9 Estimated capital expenditures budget. Converted to USD using historical annual average exchange rates. 10 Calculated using annual average RUB/USD exchange rates and average exchange rates for the first half of 2019. 11 Calculated based on the following exchange rates: RUB/USD at 65.60, RUB/EUR at 74.90. 12 Freight and railway transportation costs calculated as of March 2019, transhipment costs calculated based on tariffs published by Vostochnaya Stevedoring Company, the railway transportation costs converted into USD at the average 2018 RUB/USD exchange rate of 62.70. - 175-

Notes: Represented scheme includes LPG and naphtha purchased from third parties for resale, as well as certain LPG and naphtha volumes produced directly from APG processing. (1) Freight and railway transportation costs calculated as of March 2019, transhipment costs calculated based on announced tariffs by Vostochnaya Stevedoring Company, and the railway transportation costs converted into USD at the average 2018 RUB/USD exchange rate of 62.70. (2) SIBUR International GmbH. (3) Amsterdam, Rotterdam, Antwerp.

Economies of scale

This project will transform the Group's Tobolsk site into an integrated multi-asset hub with shared fixed and infrastructure costs as well as providing opportunities for investment in additional chemical facilities in the future. ZapSibNeftekhim will benefit from its close proximity to the largest GFU of the Group (8 million tonnes capacity), located in Tobolsk. It will become a cornerstone asset for further brownfield, low-cost capacity expansion in the site.

Low volatility of the Group's operating cash flow after the commissioning of ZapSibNeftekhim

Upon the commissioning of ZapSibNeftekhim, the Group's cash flows are expected to become much more resilient to oil price fluctuations, as ZapSibNeftekhim's production unit will enable the Group to almost double its share of processed feedstock, thus securing feedstock into the part of the business with higher profitability on top of the Midstream segment's external sales. Moreover, the Group's cash flows will be less volatile than those of the energy companies' and the petrochemical companies that use oil-related feedstock.

In a high oil price environment, the margins of petrochemical companies decline while the earnings of energy players rise. Conversely, lower energy prices have an inverse impact on the earnings of petrochemical and energy companies. Standing on those two pillars and capturing the upside of the gas processing and petrochemical business, the Group's profitability will become aligned with the energy price.

Ramp-up strategy

ZapSibNeftekhim's ramp-up profile is expected to be in line with industry benchmarks. The Group plans for ZapSibNeftekhim operations to launch with modest capacity rates at easier units and gradually move over time to increase integration and throughput until the whole complex is - 176-

operating fully commercially. Similar to the incremental ramp-up profile for a typical project, the Group expects the capacity utilisation rate of the project to range from 50-80% in the first year, then increase over time to a range of 90-100% in three years. In addition, the Group anticipates that the ramp-up for subsequent years may be affected by outages due to unexpected fouling/coking.

Employees

As of the end of June 2019, the operating team was 1,453 specialists, mainly engineers and technical staff engaged in employee training, equipment maintenance, document inspection and start-up commissioning. The ZapSibNeftekhim complex is expected to employ not more than 1,500 specialists when the plant is fully operational.

Construction progress

As of 30 June 2019, 376 kilometres of underground pipeline were laid (99% completed), 146,000 tonnes of metal structures were installed (99% completed), 3,768,000 diameter inches of surface pipeline were laid (99% completed) and 7,466 kilometres of power lines were installed (88% completed).

Sales and Marketing Strategy

The Group has expanded its sales team in Russia and other key regions of the Group's presence, in particular, one sales office in Vienna, four offices in China and one office in Istanbul.

Exporting PP, the Group has developed strong sales ties with its customers, many of which are also consumers of PE. The Group has identified its main target customers and is currently preparing its test delivery schedules, which will be activated with the first tonnes of products to be delivered from ZapSibNeftekhim. The Group has identified more than two thousand customers in Russia, the CIS, Turkey, Europe and Asia. The Group also has discussions with distribution partners in China with respect to using their distribution networks as well. To support its domestic and export sales, the Group has also been developing its logistics and warehouse network, namely logistics platform in Tobolsk and logistics hub in Central Russia, Kaluga Region.

Plastics, Elastomers and Intermediates Segment

The Plastics, Elastomers and Intermediates segment is a petrochemicals segment that produces a variety of petrochemical products, such as (i) plastics and organic synthesis products comprising PET, glycols, EPS, alcohols and acrylates, (ii) elastomers comprising various grades of commodity and speciality rubbers and TPE, and (iii) MTBE and fuel additives, which are sold externally. This segment also produces intermediate products, including butadiene, isoprene, isobutylene, propylene, ethylene oxide, ethylene, benzene, styrene, PTA and others, which are primarily used internally, with a minor share being sold externally to the market.

The Plastics, Elastomers and Intermediates segment's sales accounted for 29.7%, 30.1%, 32.3% and 31.7% of the Group's total external revenues in the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016, respectively. The Group's total external revenue and sales volumes for the Plastics, Elastomers and Intermediates segment grew from RUB 57 billion and 2.0 million tonnes, respectively, in 2009 to RUB 107 billion and 2.2 million tonnes, respectively, in 2013, and further to RUB 171 billion and 2.4 million tonnes, respectively, in 2018.

As of 31 December 2018, sales in Russia accounted for 64% of the total external revenue for the Plastics, Elastomers and Intermediates segment, while sales in Europe, Asia and CIS accounted for 36%. - 177-

Plastics and organic synthesis products

The Group's plastics and organic synthesis product group comprises primarily PET, glycols, EPS, alcohols and acrylates. These products are used primarily in the FMCG, construction and chemicals industries.

PET is a thermoplastic polymer resin of the polyester family it has geometrically identical granules and is primarily used in manufacturing PET packaging for beverages and food, as well as other containers.

Glycols are viscous liquids, which include MEG, diethylene glycol and trienthylene glycol. These are used primarily in the production of PET, polyester fibre, de-icing liquids, cooling and anti- freezing liquids, extragent for aromatic hydrocarbons and reagent for natural gas drying.

EPS is a granulated polymer with round granules made from styrene monomer. EPS is used in the production of thermo-insulation blocks and packaging materials, as well as for decorative elements.

Alcohols are colourless liquids, which include two-ethylhexanol, butyl alcohol and isobutyl alcohol. Alcohols are used in organic synthesis in the production of plasticisers, acetates, acrylates, oil additives, as solvents for plastics and varnish and as anti-foaming agent, as well as a component of perfume compounds.

Acrylates are liquids with a strong odour and include ethers of acrylic acid, butyl, methyl and ethyl. Acrylates are mainly used in the production of acrylic emulsions, superabsorbents, building mixes and adhesives used in the construction and textile industries.

The Group produces plastics and organic synthesis products primarily from ethylene and propylene derivatives, which the Group also produces as part of its intermediate products manufacturing.

The Group sells plastics and organic synthesis products to customers in the chemical, construction and FMCG industries in Russia and abroad, with a majority of these products sold domestically. The Group also uses certain volumes of these products for further processing into other petrochemicals in this product group and others. For example, the Group uses glycols for further processing into PET, and alcohols for its own production of butyl acrylate.

Elastomers

Elastomers include commodity rubbers, speciality rubbers and TPE.

Commodity rubbers comprise polyisoprene rubber ("IR"), polybutadiene rubber (PBR) and styrene-butadiene rubbers ("SBR") (such as emulsion styrene-butadiene rubber ("ESBR") and solution styrene-butadiene rubber ("SSBR")). These are butadiene or isoprene polymers as well as co-polymers of butadiene and styrene or alphamethylstyrene, which have elastic and other properties that are partially similar to natural rubbers. Commodity rubbers are used in the production of tyres, mechanical rubber goods for the automobile and machine-building industries, asbestos technical (frictional) goods and adhesives, as well as footwear.

Speciality rubbers comprise co-polymers such as nitrile-butadiene ("NBR"), which is a complex mixture of unsaturated co-polymers of acrylonitrile and butadiene, and butyl rubbers (IIR), which is a co-polymer of isobutylene and a small amount of isoprene. In addition to the basic properties of rubber (such as elasticity), NBR is characterised by oil and petrol resistance quality, while IIR is characterised by gas impermeability. Speciality rubbers are used mostly in the production of - 178-

tyre inner tubes and vulcanising diaphragms, mechanical rubber goods for the automobile and machine-building industries, asbestos technical (frictional) goods and adhesives, as well as footwear.

TPE are a mix of polymers (usually a plastic and a rubber), which consists of materials with both thermoplastic and elastomeric properties. Styrenic block copolymers ("SBCs") represent the vast majority of global TPE capacity. According to IISRP, SBS is the dominant product of the SBC group. TPE are widely used in construction, healthcare, automotive and electronics.

The Group produces elastomers from butadiene, isoprene, isobutylene and styrene, all of which the Group also produces as part of its intermediate products manufacturing and which are produced through cracking and other chemical processing of raw NGL, LPG and naphtha.

The Group sells elastomers primarily to customers in the automotive industry (for tyre manufacturing, the construction, healthcare, and electronic industries in Russia and abroad.

MTBE and Fuel Additives

MTBE is a fuel additive used to obtain higher octane values for gasoline. The Group produces MTBE from the reaction of methanol with isobutylenes and purchases MTBE directly from third parties for resale. The Group sells MTBE to oil refineries in Russia and internationally.

Other fuels and fuel additives represent an insignificant share of the Group's revenue. These products are primarily used in the energy and petrochemical industries. Other fuels and fuel additives are by-products of the Group's production processes. The Group sells other fuels and fuel additives to customers in the energy and petrochemical industries in Russia and abroad. The Group also consumes certain volumes of these products internally.

Intermediates and other chemicals

Intermediates and other chemicals primarily comprise ethylene oxide, PTA, butadiene, styrene, benzene, isobutylene, isoprene and others. The Group primarily uses these products internally for processing into higher value-added petrochemical products of the Group. The Group also sells these products to other petrochemical companies.

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Production Sites

The following table sets forth a summary of the Plastics, Elastomers and Intermediates segment's production sites:

Nameplate capacity (tonnes per annum) As of 31 December Commissioning date/date of latest Share of the Products Production site Location 2018 2017 2016 modernisation Group's ownership

Plastics & organic synthesis products PET Polief ...... Bashkortostan ...... 252,000 252,000 252,000 2009/2013 100% SIBUR-PET ...... Tver ...... 75,250 75,250 75,250 2003/2008 100%

Glycols SIBUR-Neftekhim ...... Nizhny Novgorod region ...... 308,900 308,900 297,700 1982/2015 100%

Expandable polystyrene (EPS) SIBUR-Khimprom ...... Perm ...... 100,000 100,000 100,000 2011 100%

Alcohols SIBUR-Khimprom ...... Perm ...... 164,700 164,700 164,700 1979,1985/2013 100%

Acrylates SIBUR-Neftekhim ...... Nizhny Novgorod region ...... 71,388 63,211 63,211 2004/2016 100% Subtotal ...... 972,238 964,061 952,861 — —

Elastomers Commodity rubbers PBR ...... 91,000 91,000 91,000 1964 PBR-Nd ...... 35,000 30,000 30,000 2005/2018 ESBR ...... 80,000 80,000 80,000 1949/2012 SSBR...... VoronezhSintezKauchuk ...... Voronezh ...... 26,800 26,800 26,800 2005/2009 100%

IR ...... 82,000 82,000 82,000 1968/2012 ESBR ...... SIBUR Togliatti ...... Togliatti ...... 60,000 60,000 60,000 1961/2012 100%

Speciality rubbers NBR ...... Krasnoyarskiy ZSK ...... Krasnoyarsk ...... 46,000 42,500 42,500 1952/2018 74.99%(1) IIR ...... SIBUR Togliatti ...... Togliatti ...... 75,000 75,000 75,000 1982/2013 100% 1959/Currently not Latexes ...... VoronezhSintezKauchuk ...... Voronezh ...... — — — in operation 100% - 180-

Nameplate capacity (tonnes per annum) As of 31 December Commissioning date/date of latest Share of the Products Production site Location 2018 2017 2016 modernisation Group's ownership

Thermoplastic elastomers (TPE) VoronezhSintezKauchuk ...... Voronezh ...... 85,000 85,000 85,000 1993/2013 100% Subtotal ...... 580,800 572,300 572,300 — —

MTBE Uralorgsintez ...... Perm region ...... 65,000 65,000 220,000 1979/ Sold in 2017 100% SIBUR Tobolsk ...... Tobolsk ...... 155,000 155,000 155,000 1997/2014 100% SIBUR-Khimprom ...... Perm ...... 50,000 50,000 50,000 1996/2013 100% SIBUR Togliatti ...... Togliatti ...... 120,000 120,000 120,000 2000/2016 100% Subtotal ...... 390,000 390,000 545,000 — —

Intermediates & other chemicals Benzene 1999/Divested in Uralorgsintez(2) ...... Perm region ...... 95,000 95,000 95,000 2017 Divested in 2017

Propylene SIBUR-Khimprom ...... Perm ...... 96,500 96,500 96,500 1973/2013 100%

Ethylene SIBUR-Khimprom ...... Perm ...... 60,000 60,000 60,000 1973/2013 100%

Ethylene oxide SIBUR-Neftekhim ...... Nizhny Novgorod region ...... 324,000 324,000 300,000 1982/2017 100%

Styrene SIBUR-Khimprom ...... Perm ...... 150,000 135,000 135,000 1975/2017 100% 1964/Divested in Plastic(3) ...... Tula region ...... 60,000 60,000 60,000 2013 Divested in 2013

Pure terephthalic acid (PTA) Polief ...... Bashkortostan ...... 271,788 271,788 271,788 2005 100%

Butadiene SIBUR Tobolsk ...... Tobolsk ...... 207,000 207,000 207,000 1987/2012 100% SIBUR Togliatti ...... Togliatti ...... 80,000 80,000 80,000 1978/2012 100%

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Nameplate capacity (tonnes per annum) As of 31 December Commissioning date/date of latest Share of the Products Production site Location 2018 2017 2016 modernisation Group's ownership

Isoprene SIBUR Togliatti ...... Togliatti ...... 90,000 90,000 90,000 1964/1967 100% Subtotal ...... 1,434,288 1,419,288 1,395,288 — — ______Notes: (1) The remaining ownership share of Krasnoyarskiy ZSK is owned by Sinopec, one of the shareholders of the Company. (2) Uralorgsintez, divested in April 2017, produces up to 65,000 tonnes per annum of MTBE and 95,000 tonnes per annum of benzene for the Group under a long-term processing arrangement. (3) OAO Plastic, divested in December 2013, produces styrene for SIBUR under a processing arrangement.

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The chart below sets out average achieved utilisation capacity rates for the Plastics, Elastomers and Intermediates segment's processing and production sites and their respective products:

As of 31 December

Products Production site 2018 2017 2016

Plastics & organic synthesis products PET Polief ...... 88% 88% 85% SIBUR-PETF ...... 90% 103% 103% Glycols SIBUR-Neftekhim ...... 98% 101% 98% Expandable polystyrene (EPS) SIBUR-Khimprom ...... 105% 98% 99% Alcohols SIBUR-Khimprom ...... 104% 90% 103% Acrylates SIBUR-Neftekhim ...... 73% 77% 84% Elastomers Commodity rubbers VoronezhSintezKauchuk ...... 93% 81% 75% SIBUR Togliatti ...... 82% 82% 72% Speciality rubbers Krasnoyarskiy ZSK ...... 99% 91% 96% SIBUR Togliatti ...... 82% 89% 93% Thermoplastic elastomers (TPE) VoronezhSintezKauchuk ...... 93% 91% 86% MTBE Uralorgsintez(1) ...... 37% 51% 93% SIBUR Tobolsk ...... 96% 101% 101% SIBUR-Khimprom ...... 92% 82% 91% SIBUR Togliatti ...... 90% 73% 96% Intermediates & other chemicals Butadiene SIBUR Tobolsk ...... 98% 99% 95% SIBUR Togliatti ...... 101% 89% 74% Isoprene SIBUR Togliatti ...... 93% 85% 73% Benzene Uralorgsintez(1) ...... 96% 95% 96% Styrene SIBUR-Khimprom ...... 93% 90% 90% Plastic(2) ...... 90% 94% 91% Ethylene SIBUR-Khimprom ...... 95% 87% 87% Propylene SIBUR-Khimprom ...... 69% 69% 61% Ethylene oxide SIBUR-Neftekhim ...... 93% 97% 95% Pure terephthalic acid (PTA) Polief ...... 99% 99% 96% ______Notes: (1) Uralorgsintez, divested in April 2017, produces benzene for the Group under a long-term processing arrangement. (2) OAO Plastic, divested in December 2013, produces styrene for SIBUR under a processing arrangement.

For a discussion on factors affecting the Group's production sites' capacity utilisation, see "— Midstream Segment — Production Sites".

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Sales volumes

The following table presents data on production, purchases and sales volumes of the Plastics, Elastomers and Intermediates segment products for the periods indicated:

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (tonnes, except as stated) Plastics and organic synthesis products: Production ...... 459,821 922,785 893,793 899,857 Glycols ...... 142,278 302,243 300,017 291,329 Alcohols ...... 86,788 170,510 148,585 169,489 PET ...... 129,944 295,161 298,605 290,618 Acrylates ...... 24,955 50,360 48,453 49,099 DOTP ...... 22,635 — — — Expandable polystyrene (EPS) ...... 53,221 104,510 98,133 99,322 Purchases from third parties ...... 4,532 5,835 7,217 8,908 Total production and purchases ...... 464,353 928,620 901,009 908,765 (Internal use)(1) ...... (79,764) (124,384) (127,095) (126,289) (Increase) / decrease in stock ...... (4,616) (4,562) (2,689) (6,425) External sales volumes Glycols ...... 112,076 204,055 198,612 195,067 Domestic ...... 77,404 133,405 103,391 107,686 Export ...... 34,672 70,650 95,221 87,381 Alcohols ...... 52,115 144,895 125,893 141,268 Domestic ...... 33,433 92,878 88,161 85,115 Export ...... 18,682 52,017 37,732 56,152 PET ...... 136,184 294,568 294,796 285,961 Domestic ...... 134,391 293,768 291,630 280,049 Export ...... 1,793 801 3,166 5,912 Acrylates ...... 31,429 52,921 53,736 54,666 Domestic ...... 11,841 22,685 38,653 36,186 Export ...... 19,588 30,236 15,083 18,481 DOTP...... 15,701 — — — Domestic ...... 11,621 — — — Export ...... 4,080 — — — Expandable polystyrene (EPS) ...... 48,170 103,233 98,187 99,090 Domestic ...... 31,643 68,923 67,123 73,028 Export ...... 16,527 34,311 31,064 26,061 External sales volumes ...... 395,675 799,674 771,225 776,051 Domestic ...... 300,333 611,660 588,958 582,064 Export ...... 95,342 188,014 182,267 193,987

Elastomers: Production ...... 258,529 504,456 484,698 444,612 Commodity rubbers...... 160,183 320,299 301,593 269,285 Speciality rubbers ...... 57,119 104,880 105,347 101,998 Thermoplastic elastomers (TPE) ...... 41,227 79,276 77,757 73,330 Purchases from third parties ...... 102 38 552 712 Total production and purchases ...... 258,631 504,494 485,219 445,324 (Internal use)(1) ...... (7) 121 66 (787) (Increase) / decrease in stock ...... 10,035 (18,614) (199) (2,184) External sales volumes Commodity rubbers ...... 172,411 306,137 302,636 273,845 Domestic ...... 55,608 115,598 115,195 109,208 Export ...... 116,803 190,539 187,440 164,637 Speciality rubbers ...... 58,994 100,874 103,782 99,493 Domestic ...... 5,710 12,468 13,135 11,995 Export ...... 53,284 88,407 90,647 87,498 Thermoplastic elastomers (TPE)...... 37,255 78,989 78,669 69,015 Domestic ...... 17,678 49,248 43,560 29,471 Export ...... 19,577 29,742 35,109 39,544 - 184-

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (tonnes, except as stated) External sales volumes ...... 268,659 486,001 485,087 442,353 Domestic ...... 78,996 177,313 171,890 150,674 Export ...... 189,663 308,687 313,197 291,679

MTBE and fuel additives: Production ...... 164,088 327,020 354,556 502,961 Purchases from third parties ...... 30,391 193,707 129,898 6,230 Total production and purchases ...... 194,479 520,727 484,453 509,191 (Internal use)(1) ...... (408) (546) 989 (516) (Increase) / decrease in stock ...... 1,934 (137) (375) (1,543) External sales volumes ...... 196,004 520,044 485,068 507,132 Domestic ...... 69,691 337,235 189,237 290,414 Export ...... 126,314 182,809 295,830 216,718

Other fuels and fuel additives: Production...... 210,027 394,755 431,751 227,161 Purchases from third parties ...... 1,580 2,660 33,396 1,933 Total production and purchases ...... 211,608 397,415 465,147 229,094 (Internal use)(1) ...... (129,714) (240,370) (280,514) (69,823) (Increase) / decrease in stock ...... (664) 458 208 1,578 External sales volumes ...... 81,230 157,502 184,841 160,849 Domestic ...... 80,267 157,502 125,568 66,411 Export ...... 963 — 59,273 94,438

Intermediates and other chemicals: Production ...... 1,796,207 3,767,197 3,597,488 3,657,928 Intermediates, including ...... 1,263,281 2,755,957 2,731,950 2,800,883 Benzene ...... 79,120 165,173 168,228 165,028 Styrene ...... 97,600 196,502 177,454 175,334 Pure terephthalic acid (PTA) ...... 28,689 268,876 268,226 260,558 Ethylene oxide ...... 153,475 305,977 293,322 284,281 Butadiene ...... 139,454 284,409 276,231 255,990 Isoprene ...... 44,086 84,080 76,674 65,271 Isobutylene ...... 92,251 181,188 191,437 170,711 Ethylene ...... 29,503 56,748 51,966 52,316 Propylene ...... 33,465 66,112 66,571 59,228 Other intermediates ...... 565,638 1,146,892 1,161,841 1,312,166 Other chemicals ...... 532,926 1,011,240 865,539 857,046 Transfer from the Olefins and Polyolefins segment . 139,841 332,600 370,730 356,793 Ethylene ...... 115,375 231,891 228,001 224,229 Propylene ...... 24,466 100,709 142,729 132,564 Purchases from third parties ...... 2,088 3,759 2,728 4,033 Total production and purchases ...... 1,938,137 4,103,556 3,970,946 4,018,754 (Internal use)(1) ...... (1,684,739) (3,525,416) (3,446,745) (3,546,928) (Increase) / decrease in stock ...... 14,962 (10,614) 3,657 (3,002) Gross sales, including ...... 268,360 567,526 527,858 470,253 Intercompany sales to the Olefins and Polyolefins segment ...... 40,585 84,394 7,366 10,635 External sales Benzene ...... 29,594 71,653 88,988 77,288 Domestic ...... 27,618 70,641 72,403 77,288 Export ...... 1,976 1,012 16,585 - Styrene ...... 27,348 66,041 52,823 58,437 Domestic ...... 23,136 50,202 39,632 40,944 Export ...... 4,212 15,839 13,191 17,493 Pure terephthalic acid (PTA) ...... 886 7,688 15,886 15,251 Domestic ...... 704 4,530 8,133 10,497 Export ...... 182 3,158 7,753 4,754 Propylene ...... 6,713 44,096 95,811 65,998 - 185-

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (tonnes, except as stated) Domestic ...... 6,194 41,143 47,410 17,237 Export ...... 519 2,953 48,401 48,761 Ethylene oxide ...... 50,606 88,201 74,988 73,679 Domestic ...... 38,724 72,888 61,307 59,199 Export ...... 11,881 15,313 13,681 14,479 Butadiene ...... 2,079 3,073 3,053 4,390 Domestic ...... 2,079 3,073 3,053 4,390 Export ...... — — — — Isoprene ...... 643 3,680 5,025 4,749 Domestic ...... 139 236 251 179 Export ...... 504 3,443 4,774 4,570 Isobutylene ...... 4,229 14,486 14,672 9,260 Domestic ...... 4,229 14,486 14,672 9,260 Export ...... — — — — Other intermediates ...... 76,948 133,493 110,864 96,727 Domestic ...... 55,966 107,149 92,164 81,733 Export ...... 20,982 26,345 18,700 14,993 Other chemicals ...... 28,728 50,722 58,382 53,840 Domestic ...... 23,578 42,248 51,215 44,057 Export ...... 5,149 8,474 7,167 9,783 External sales volumes ...... 227,775 483,132 520,492 459,618 Domestic ...... 182,367 406,596 390,240 344,785 Export ...... 45,407 76,536 130,251 114,833 ______Note: (1) Includes internal use at the segment's production facilities and immaterial natural losses.

Midstream Segment

The Group's Midstream segment comprises (i) gathering and processing of APG that the Group purchases from major Russian oil companies, (ii) transportation, fractionation and other processing of NGLs that the Group produces internally or purchases from major Russian gas companies, and (iii) production, marketing and sales of energy products, such as natural gas, LPG and naphtha. The Group uses them as feedstock for its Olefins and Polyolefins segment and its Plastic, Elastomers and Intermediates segment and sells these energy products on the Russian and international markets.

The Group owns and operates the most extensive infrastructure for processing and transportation of petrochemical feedstock in Western Siberia (for detailed transportation infrastructure discussion, see "— Transportation and Logistics"). The Group has invested USD 4.5 billion since 2009 in the expansion and upgrade of its gas processing and transportation infrastructures in the region. Developed infrastructure allowed SIBUR to consolidate feedstock flows from all major oil and gas producers in the region on a competitive-price basis. Various oil and gas fields form a diversified feedstock base for SIBUR in Western Siberia, where the Group's Midstream segment operates eight GPPs and one gas fractionation unit (GFU).

The following chart provides information on the Group's production sites in Western Siberia, as well as the infrastructure:

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The Midstream segment's sales accounted for 43.1% of the Group's total external revenues in the six months ended 30 June 2019 and 42.3%, 40.5% and 41.5% of the Group's total external revenues in the years ended 31 December 2018, 2017 and 2016, respectively. The Group's total external revenue for the Midstream segment grew from RUB 47 billion in 2009 to RUB 123 billion in 2013, and further to RUB 241 billion in 2018. The Group's total sales volumes for the Midstream segment grew from 2.8 million tonnes (2.1 million tonnes of which were internal sales to the Group's petrochemical segments) in 2009 to 4.8 million tonnes (2.0 million tonnes of which were internal sales) in 2013, and further to 6.4 million tonnes (3.3 million tonnes of which were internal sales) in 2018. The Group anticipates the percentage of total external revenue attributable to Midstream sales will decrease to approximately 3.7 million tonnes per annum following the launch of ZapSibNeftekhim, as a significant portion of currently externally sold LPG (approximately 6.0 million tonnes per annum) will be consumed internally as feedstock.

The Group's Midstream segment includes the following products:

Liquefied Petroleum Gases (LPG)

LPG refers primarily to propane (C3 fractions), butane, isobutane (C4 fractions) or propane-butane mixtures. LPG is mainly used by the residential sector for heating and as a motor fuel as well as a feedstock for steam cracking to produce petrochemicals, particularly olefins.

The Group mainly produces LPG by fractionating raw NGL at its GFUs. Historically, LPG has been the Group's largest energy product in terms of revenue, although this is expected to change after the completion of the ZapSibNeftekhim project. Based on information from IHS, the Group was the largest producer of LPG in Russia in 2018 contributing approximately 45% of total Russian LPG production. The Group sells LPG to external customers in Russia and abroad and also supplies it to the Group's petrochemicals operations as feedstock for the production of petrochemical products.

Natural gas

Natural gas is a hydrocarbon gas mixture primarily comprising methane (C1 fraction) and ethane (C2 fraction). Natural gas is primarily used as a fuel for power generation, residential, commercial - 187-

and industrial applications as well as feedstock for the production of mineral fertilisers and methanol. Ethane can also be used as chemical feedstock.

The Group produces natural gas at its GPPs through the processing of APG purchased from oil companies, which is separated into natural gas and raw NGL. The Group sells its natural gas to Russian oil and gas companies and, to a limited extent, to Russian regional and municipal power companies. The Group also uses certain volumes of natural gas internally, mainly as fuel at its GPPs and for heating power generation.

Naphtha

Naphtha (C5+ fractions) is a mix of liquid hydrocarbons and refers primarily to pentane, isopentane, hexane and heavier fraction hydrocarbons. Naphtha is primarily used as feedstock for energy, utilities and petrochemical industries.

The Group produces naphtha by fractionating raw NGL at its GFUs and also purchases it directly from oil and gas companies. The Group supplies it to the Group's petrochemicals operations as feedstock for the production of petrochemical products, and sells the naphtha it produces and purchases to external customers in Russia and abroad.

Raw NGL

Raw NGL represents a mixture of hydrocarbon fractions from C3 to C6 (propane, butane, pentane, hexane). Raw NGL is primarily used as feedstock for fractionation into energy products and as a feedstock for petrochemicals production.

The Group produces raw NGL through the processing of APG, which is separated into natural gas and raw NGL, and purchases it from gas companies. The Group primarily uses raw NGL for further processing (fractionation) into other energy products and as a feedstock for the Group's petrochemicals production. The Group also sells marginal volumes of raw NGL externally.

Production Sites

The following table sets forth a summary of the Group's Midstream segment's production sites:

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Nameplate processing capacity

As of 31 December Commissioning date/date of latest Share of the Production site Location Products 2018 2017 2016 modernisation Group's ownership

Gas processing plants (GPPs) (in billions cubic metres of APG) Gubkinskiy GPP ...... 2.6 2.6 2.6 1988/2010 100% Vyngapurovskiy GPP ...... Yamal-Nenets Autonomous 4.2 4.2 4.2 1990/2016 100% Muravlenkovskiy GPP ...... Area Natural gas, raw NGL 1.3 1.3 1.3 1988 100%

Yuzhno-Balykskiy GPP ...... Khanty-Mansi Autonomous 2.9 2.9 2.9 1978/2017 100% Belozerniy GPP ...... Area Natural gas, raw NGL 4.6 4.6 4.6 1980 100%

Nizhnevartovskiy GPP ...... Khanty-Mansi Autonomous Natural gas, raw NGL, naphtha, 6.2 6.2 6.2 1974/2012 100% Nyagan GPP ...... Area LPG 2.6 2.6 2.6 1987/2009 100%

Khanty-Mansi Autonomous Yuzhno-Priobskiy GPP(1) ...... Area Natural gas, raw NGL 0.9 0.9 0.9 2015 50% Total processing capacity ...... 25.4 25.4 25.4

Gas fractionation units (GFUs) (in million tonnes of raw NGLs) SIBUR-Tobolsk (unit 1) ...... 3.8 3.8 3.8 1984/2014/2016 100% SIBUR-Tobolsk (unit 2) ...... Tobolsk LPG, naphtha 4.2 4.2 4.2 2014/2016 100%

SIBUR-Khimprom ...... Perm LPG, naphtha 0.6 0.6 0.6 1975/2013 100%

Tchaikovskiy Sold in April Uralorgsintez ...... (Perm region) LPG, naphtha 0.9(2) 0.9(2) 0.9 1979/Sold in 2017 2017 Total fractionation capacity ...... 9.5 9.5 9.5 ______Notes: (1) SIBUR and Gazprom Neft jointly operate Yuzhno-Priobskiy GPP with an annual APG processing capacity of 900 million cubic metres, each owning 50%. Gazprom Neft supplies APG to the plant for processing into raw NGL and natural gas, SIBUR pays for 50% of the total APG volumes supplied to the plant, while the remaining 50% is processed for Gazprom Neft. SIBUR obtains 50% of all raw NGL and dry gas volumes produced, while Gazprom Neft obtains the rest. Subsequently, SIBUR purchases Gazprom Neft's share of raw NGL and sells its share of natural gas to Gazprom Neft. (2) The Group utilises fractionation capacities of Uralorgsintez divested in April 2017 under a long-term processing arrangement.

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The following table sets forth average achieved utilisation capacity rates for the Group's Midstream Segment's processing and production sites for the periods indicated: Year ended 31 December 2018 2017 2016 GPPs(1), including ...... 86% 90% 88% Yuzhno-Priobskiy GPP, JV with Gazprom Neft ...... 100% 101% 98% GFUs ...... 94% 92% 87% ______Note: (1) Including Yuzhno-Priobskiy GPP, JV with Gazprom Neft.

Weighted average nameplate capacity during the year may differ from nameplate capacity as of the year end if the capacity had been expanded or the asset had been consolidated during the respective period. The nameplate capacity is the capacity registered with Rostekhnadzor. It is defined as the volume of product that could be produced by a plant or a unit if it operates a certain number of hours, almost always less than the total number of hours in a calendar year. As such, the nameplate capacity implicitly assumes scheduled shutdowns of a plant. The nameplate capacity does not take into account quality, grade or other characteristics of the products produced.

Capacity utilisation is calculated as total production as a percentage of the weighted average nameplate capacity during the year. The Group seeks to operate its production facilities at optimal levels of capacity utilisation taking into consideration prevailing general economic conditions, availability of feedstock, demand for the Group's products and other factors. Capacity utilisation may fall below 100% due to a number of factors. Capacity utilisation below 100% at GPPs is driven primarily by the availability of feedstock at a particular location during the relevant period. Capacity utilisation below 100% at other production facilities is driven more by a combination of market demand for each particular product and the Group's decision and ability to switch the production between different types of products. In addition, capacity utilisation levels below 100% may reflect lost days of production due to unscheduled plant shutdowns at the Group's own facilities as well as at facilities of the Group's suppliers or customers.

Capacity utilisation exceeds 100% when the Group is able to run a facility more efficiently over time, upgrading the technology and implementing other debottlenecking measures, resulting in improved utilisation rates as compared with nameplate capacity. As the nameplate capacity includes scheduled shutdowns, capacity utilisation at a particular facility may exceed 100% during those periods in which the frequency and duration of shutdowns are different from those scheduled.

Sales Volumes

The following table presents data on production, purchases and sales volumes of the Midstream segment products for the periods indicated:

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (tonnes, except as stated) LPG Production(1) ...... 3,732,458 7,626,454 7,481,316 6,925,332 Production, SIBUR's share ...... 3,141,458 6,444,454 6,299,316 6,008,730 Purchases from third parties, including...... 329,120 657,577 608,273 442,788 purchases for resale ...... 314,704 619,130 563,385 429,648 Total production and purchases ...... 3,470,579 7,102,031 6,907,589 6,451,519 (Internal use)(2) ...... (6,011) (18,857) (19,540) (19,834) (Increase) / decrease in stock ...... 63,092 (35,565) (29,210) 67,186 Gross sales, including ...... 3,527,660 7,047,608 6,858,840 6,498,871

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Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (tonnes, except as stated) Intercompany sales to the Olefins and Polyolefins segment ...... 341,851 769,130 999,010 730,555 Intercompany sales to the Plastics, Elastomers and Intermediates segment 450,817 921,322 935,797 1,056,273 External sales 2,734,992 5,357,156 4,924,033 4,712,043 Domestic ...... 853,606 1,745,825 1,668,708 1,379,043 Export ...... 1,881,387 3,611,331 3,255,326 3,332,230

Natural Gas (thousands of m3) Production(3) ...... 9,729,500 19,729,662 19,722,448 19,427,417 Production, SIBUR's share(4) ...... 9,540,699 19,355,569 19,343,229 19,051,362 Purchases from third parties ...... — — 1,439 432 Total production and purchases ...... 9,540,699 19,355,569 19,344,669 19,051,794 (Internal use)(2) ...... (407,341) (833,567) (867,251) (810,517) (Increase) / decrease in stock ...... (6,363) (2,758) — — External sales ...... 9,126,995 18,519,244 18,477,418 18,241,276 Domestic ...... 9,126,995 18,519,244 18,477,418 18,241,276 Export ...... — — — —

Naphtha Production...... 733,305 1,490,148 1,494,801 1,525,536 Purchases from third parties, including...... 515,513 762,233 390,597 544,061 purchases for resale ...... 31 — — 115,069 Total production and purchases ...... 1,248,818 2,252,382 1,885,398 2,069,597 (Internal use)(2) ...... 173 108 (187) (4,811) (Increase) / decrease in stock ...... 303 (12,892) 17,142 15,064 Gross sales, including ...... 1,249,293 2,239,598 1,902,354 2,079,851 Intercompany sales to the Olefins and Polyolefins segment ...... 650,439 1,194,533 1,023,908 780,781 External sales ...... 598,855 1,045,064 878,445 1,299,069 Domestic ...... 149,819 275,771 312,224 244,026 Export ...... 449,035 769,293 566,221 1,055,043

Raw NGL Production(3) ...... 2,685,767 5,577,788 5,561,661 5,393,328 Production, SIBUR's share(4) ...... 2,608,421 5,416,730 5,401,806 5,247,785 Purchases from third parties ...... 1,439,024 2,689,251 2,577,842 2,971,140 Total production and purchases ...... 4,047,445 8,105,981 7,979,648 8,218,925 (Fractionation)(5) ...... (4,315,767) (8,912,269) (8,722,294) (8,177,021) (Fractionation, SIBUR's share) ...... (3,715,767) (7,712,269) (7,522,294) (7,246,461) (Increase) / decrease in stock ...... (65,974) 10,738 4,058 48,359 Gross sales, including ...... 265,704 404,450 461,412 1,020,822 Intercompany sales to the Olefins and Polyolefins segment ...... 265,704 404,450 458,395 816,229 External sales ...... — — 3,017 204,593 Domestic ...... — — 151 70,050 Export ...... — — 2,867 134,543 ______Note: (1) Including production volumes under processing arrangements. (2) Including internal use at the segment's production facilities and immaterial natural losses. (3) Including third-party volumes processed at SIBUR's capacities. (4) Excluding third-party volumes processed at SIBUR's capacities. (5) Including fractionation volumes under processing arrangements.

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Raw Materials Sourcing

Hydrocarbon Feedstock

The Group uses two major types of hydrocarbon feedstock: APG and NGLs. APG is used as a feedstock for the Group's midstream business.

APG is a by-product of oil production and a key feedstock used by the Group in the production of its energy products. APG accounted for 33.1% and 32.5% of the Group expenses related to third- party hydrocarbon feedstock purchases in the six months ended 30 June 2019 and the year ended 31 December 2018, respectively. As a percentage of total feedstock and materials costs, APG accounted for 23.3% in each of the six months ended 30 June 2019 and the year ended 31 December 2018.

NGLs, comprising raw NGL, LPG and naphtha, are used as a raw material for both the midstream and petrochemicals businesses. Raw NGL is produced as a result of APG processing or the stabilisation of unstable gas condensate which is obtained from processing wet natural gas extracted from gas fields. LPG and naphtha are produced through the fractionation of raw NGLs. SIBUR produces NGLs at its own GPPs and GFU and also purchases them from third parties. NGLs accounted for 66.9% and 67.5% of the Group expenses related to third-party hydrocarbon feedstock purchases in the six months ended 30 June 2019 and the year ended 31 December 2018, respectively. As a percentage of total feedstock and materials costs line in the Group's operating expenses, NGLs accounted for 47.1% and 48.4% in the six months ended 30 June 2019 and the year ended 31 December 2018, respectively.

The following table presents selected data on the Group's feedstock purchasing volumes for the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016 (excluding volumes purchased for trading, which are reported as goods for resale):

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 (tonnes, except as stated) NGLs ...... 1,968,908 3,489,873 3,013,229 3,413,144 APG (thousand cubic metres) ...... 10,987,079 22,283,359 22,280,387 21,927,209 Paraxylene ...... 56,906 176,386 177,061 171,034 Benzene ...... 66,527 143,433 142,695 140,006

Other Feedstock

Key Suppliers

supply contracts had a weighted average maturity of 12.7 years and 13.6 years, respectively. Rosneft remained the Group's major APG supplier with a 75.3% and 73.5% share in the Group's total APG supplies in volume terms in the first half of 2019 and 2018 year.

As of 30 June 2019 and 31 December 2018, approximately 72% and 77% of the Group's planned NGLs feedstock supplies for the first half of 2019 and 2018 year, respectively, were guaranteed under multi-year supply contracts. Overall, as of 30 June 2019 and 31 December 2018, the Group's multi-year NGLs feedstock supply contracts had a weighted average maturity of 14.4 years and 15.4 years, respectively. The Group's major external raw NGL suppliers are NOVATEK and Gazprom, with 65.0% and 60.1% share in the Group's total NGLs supplies in volume terms in the first half of 2019 and 2018, respectively.

The Group and Gazprom Neft jointly operate Yuzhno-Priobskiy GPP with an annual APG processing capacity of 900 million cubic metres, each owning 50%. Gazprom Neft supplies APG to the plant for processing into raw NGL and natural gas. The Group pays for 50% of the total APG volumes supplied to the plant, while the remaining 50% is processed for Gazprom Neft. The Group obtains 50% of all raw NGL and dry gas volumes produced, while Gazprom Neft obtains the rest. Subsequently, the Group purchases Gazprom Neft's share of raw NGL and sells its share of natural gas to Gazprom Neft.

Pricing

Oil companies produce APG as a by-product of oil extraction and by law must evacuate it from the field or otherwise utilise it. Failure to do so can result in fines and potentially jeopardise an oil company's licence to operate the field. Most oil companies in Western Siberia do not own gas processing facilities and have been reluctant to develop such facilities as this requires substantial capital investments, while oil companies prefer to invest in their core oil exploration and production business. Apart from being processed into hydrocarbon feedstock at a GPP, only limited volumes of APG can be used productively locally, mostly for power generation or for reinjection into the reservoir.

The Russian Government has consistently increased incentives for oil companies to utilise APG. Based on the Russian Government's resolution issued in November 2012, penalties for APG flaring exceeding permitted thresholds (currently set at 5% of APG production volumes) have been substantially increased and have become material for oil companies: effective 1 January 2013, the penalty has been increased from 4.5x the standard emission charge in 2012 to 12x the standard emission charge in 2013 and 25x the standard emission charge starting from 2014. The standard emission charges depend on the type of pollutant and are regularly indexed. According to CDU TEK, the total volume of flared APG in Russia in 2018 was 15.7 billion cubic metres or 15% of total produced volumes, decreasing APG utilization in Russia to 85% compared to 87% in 2017 mainly due to new oil fields coming on stream in Eastern Siberia. In Western Siberia APG utilisation remained largely flat at 91% in 2018 and 2017, according to Petromarket.

The Group provides oil companies with a solution for their otherwise unusable APG. In return, the Group is able to source APG at advantageous prices. Given the limited options for using APG and the lack of alternatives for evacuating it from oilfields, there is no market or benchmark price for - 193-

APG. APG pricing is also not subject to government regulation. As a result, the Group purchases APG from oil companies at prices that are negotiated on a case-by-case basis and typically substantially differ from the FAS-regulated natural gas prices. The magnitude of the difference and the absolute price for APG is dependent on the following key factors: the quality and composition of APG in terms of target liquid fractions content, distance of an APG source from the Group's GPPs, availability of collection and transportation infrastructure and capital and operating expenditures needed to construct, expand and maintain that infrastructure. The price is also dependent on the potential capital expenditures that the oil company would need to incur to construct its own gas processing capacity as an alternative to selling APG to the Group.

The Group has two types of APG purchase contracts:

• Under the first contract type, the APG purchase price, once agreed upon in absolute terms, is typically regularly indexed to reflect changes in the FAS-regulated prices for natural gas.

• Under the second contract type, the APG purchase price is indexed in line with changes in prices for APG derivatives: basket of natural gas and raw NGL.

Additional volumes of APG that the Group sources from oil companies (new volumes under new agreements or volumes under existing agreements that exceed initially pre-agreed or guaranteed volumes) can be supplied at a higher price due to additional capital and operating expenses incurred by oil companies to produce and deliver such volumes. Also, the modification of terms of existing agreements, either at expiry or as a result of renegotiation, may cause material changes in the Group's APG pricing levels. For more information, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Natural Gas Prices".

See also "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Feedstock Sourcing and Mix".

Electricity

The Group makes electricity purchases in a centralised manner. This approach enables the Group to leverage its purchasing power and to optimise its electricity purchasing costs. In addition to purchases of electricity for internal needs, the Group also buys electricity for further resale to third parties, which primarily include other companies located at the Group's production sites.

The Group also owns and continues to expand its own electric power generating capacity in order to reduce its exposure to higher electricity prices from third-party suppliers. In 2014, the Group launched an 18MW power plant at the Perm production site. In February 2016, the Group acquired - 194-

Tobolsk HPP with an installed capacity of 665MW of electric power and 2,585MW of heat. In 2018, the share of internal electric power generation accounts for 3.5% of the Group's total electricity consumption.

Heat

The Group sources heat energy in the form of steam and hot water from regional suppliers at regulated prices. Heat energy prices are also largely dependent on prices for natural gas. In order to minimise dependence on third-party providers, the Group generates a substantial portion of steam at its own facilities. At the Group level, the share of internally generated heat energy accounted for 76.5% of total consumed volumes in 2018. In February 2016, the Group acquired Tobolsk HPP with the capacity of 2,585 MW (or 2,223 gigacalories) of heat. The Plant is the only supplier of steam for the Group's Tobolsk production site.

For a discussion on electricity prices and heat tariffs and their impact on the Group's results of operations, see "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Energy Procurement".

TRANSPORTATION AND LOGISTICS

Due to the extensive geographical spread of the Group's operations, the Group uses a number of transportation means for delivering its feedstock and finished products, which include pipelines, railway, trucks, port facilities and services of multimodal transportation operators. A significant proportion of the Group's transportation needs is met by its own infrastructure, which includes APG, natural gas and raw NGL pipelines.

In 2018, the Group's transportation volumes were 18.6 million tonnes, of which 56% were transported by Rail, 14% by transhipment in ports, 15% by sea freight and 13% by truck.

The Group aims to enhance its logistics efficiency and improve customer services by introducing digital technologies. The current digital projects include:

• Digital order system;

• Logistics e-procurement platform; and

• Optimisation of rail logistics.

To ensure its competitive strength and provide high-quality services to the customers, the Group has developed a long-term project of logistics costs optimisation. The Group is also evolving its logistics procurement strategy and refining the model of rolling stock ownership.

Pipeline transportation

The Group owns and operates the most extensive infrastructure for transportation of petrochemical feedstock in Western Siberia, including APG, natural gas and raw NGL pipelines. Although the Group transports sufficient volumes via own pipelines, the costs are not part of the Transportation and logistics line of Operating expenses. The costs are distributed by function between the corresponding lines of Operating expenses.

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The map below illustrates the location of the Group's principal pipelines:

APG pipelines

APG that the Group purchases from oil companies in Western Siberia is transported via point-to- point pipelines, which represent direct links between oilfields/oil clusters to the Group's GPPs, creating interdependence on both the producing and the receiving end, so fostering long-term cooperation between the Group and oil companies. These pipelines had historically been built to ensure APG utilisation (as the only alternative potentially available to oil producers is flaring) and are typically owned and operated by the oil companies, with only a limited number of such pipelines in the Group's ownership. Total length of the APG pipelines owned by SIBUR was 819 kilometres as of 31 December 2018.

Natural gas pipelines

The Group transports natural gas it produces at its GPPs through its own gas pipelines primarily into the UGSS, which Gazprom owns and operates, and, to a limited extent, to regional and municipal power companies. Total length of the Group's natural gas pipelines was 250 kilometres as of 31 December 2018.

Raw NGL pipelines

A large portion of the raw NGL that is produced by SIBUR from APG or that is purchased from oil and gas companies is transported to the Group's GFUs via specialised raw NGL pipelines. At present, Russia does not have a nationwide NGL pipeline system. The Group has developed its own pipeline with a total length of 1,643 kilometres, as of 31 December 2018. At the end of 2014, the Group commissioned a new 1,100 kilometre Purovsk-Pyt-Yakh-Tobolsk pipeline with an annual capacity of up to 8 million tonnes, that has replaced certain parts of the old raw NGL - 196-

pipeline. The pipeline provides a direct connection between the Purovskiy GCP owned by PAO NOVATEK, SIBUR's Yuzhno-Balykskaya main pumping station near Pyt-Yakh, and the Group's Tobolsk production site, thus securing the Group's long-term access to the abundant NGL resources of Western Siberia. In accordance with Russian anti-trust regulations, SIBUR is obliged to provide non-discriminatory third-party access to its raw NGL pipelines. However, as such pipelines represent point-to-point connections, SIBUR has never been approached to provide such access.

Rail transportation

The Group uses rail to transport of its refined products, intermediates and feedstock, including all of the Group's LPG, naphtha and MTBE, significant volumes of raw NGL (between the Group's GPPs and GFUs) and a major part of the Group's petrochemical products.

In 2018, the Group established a 50/50 joint venture, PTC, with JSC SG-Trans, one of the Russian major railway operators. PTC is a licensed railway operator, responsible for the provision of the transportation services both for its owners and third parties. As part of the deal, the Group sold its LPG tank car fleet worth RUB 9.5 billion to PTC via a leasing company.

Rail transportation is subject to tariffs for access to Russia's main railway and usage of locomotives, which are regulated by the FAS, as well as operator fees and the cost of rented and contracted rolling stock. See "Operating and Financial Review — Significant Factors Affecting the Group's Results of Operations — Transportation Tariffs".

Truck transportation

The Group also uses trucks of different types (box trucks, container trucks, refrigerator trucks, tank trucks and polyolefins-container trucks) to transport petrochemical products within Russia and for export. The Group does not operate its own truck fleet but uses third-party services from leading Russian and foreign providers. There is no single operator that handles a significant portion of the Group's truck deliveries, as this is a highly fragmented and competitive market.

Port facilities

The Group delivers LPG, naphtha and certain other products to export markets through ports. The largest of them are Hamina (Finland), Ust-Luga (Russia), Paldiski (Estonia) and Taman (Russia) for LPG and naphtha; Nakhodka (Russia), Vladivostok (Russia) and St. Petersburg (Russia) for polyolefins; and St. Petersburg (Russia), Riga (Latvia), Temryuk (Russia) and Novorossiisk (Russia) for plastics, elastomers and intermediates. In some ports the Group uses third-party loading and storage facilities, while to the majority of customers the Group delivers on a free on- board basis. For example, LPG is primarily exported by eight leased ice-class gas carrier vessels with a capacity of 5,000-22,000 cubic metres each. Currently, port charges do not represent a significant portion of the Group's transportation costs.

Multimodal transportation services

The Group uses the services of Russia's largest multimodal transportation operators to deliver its products such as polyolefins and elastomers in containers within Russia and to export markets. Multimodal transportation operators transport the Group's products under contracts that provide for transportation by different means of transport.

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Warehouses and distribution centres

The Group purchases warehouse services from professional operators to store its petrochemical products in close proximity to the Group's production sites as well as near the facilities of key customers. The Group has its own sales desks in Russia and abroad. In preparation for the launch of ZapSibNeftekhim, a logistics hub for polymer products is being set up in Vorsino, in the Kaluga region (for further details, see "— Capital Expenditure — ZapSibNeftekhim — Logistic Hub for Polymers Distribution").

MAINTENANCE

The Group carries out the maintenance of its production facilities internally as well as using third- party maintenance service providers. The Group's production facilities are shut down periodically for scheduled maintenance and occasionally for unscheduled maintenance. In addition, the Group continuously monitors the performance of the Group's production equipment and performs any necessary online maintenance of the facilities without shutting down operations to ensure that appropriate measures are taken to optimise the long-term reliability of key equipment and production processes (see "Operating and Financial Review — Liquidity and Capital Resources — Capital Expenditures").

QUALITY CONTROL

Product quality is very important in the feedstock and energy and petrochemicals industry, and the Group takes special care of quality control of the Group's products to meet the required standards for energy and petrochemical products that the Group produces. Each of the Group's production facilities has its own quality control function. The Group implements quality control at all stages of a product's life cycle, including checking whether raw materials, technological processes and final products comply with appropriate technical and technological regulations. The Group's production facilities are subject to regular internal and external audits to ensure compliance with established procedures of quality control.

SALES AND MARKETING

The Group operates a three-tier system for managing the sales process: front office, middle office and back office. The front office is responsible for searching and engaging new clients and participating in basic decision-making, i.e. contract price, delivery terms and volume of sales. The middle office drafts and processes contracts with customers, and monitors payments, while the back office is responsible for handling sales-related documentation, such as invoices. The Group's sales function is supported by:

• Marketing team (key markets analyses, short-term demand/price forecasts, strategic planning);

• Technical services and product development team (product processing and application consulting, new grades development);

• Sales and marketing development team (capturing and implementing good practices; improving IT systems, business processes and organisational structure; developing competencies of employees in relation to sales and marketing); and

• Sales controlling team (monitoring key KPIs, setting operational goals).

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The structure of the sales and marketing function is based on operational segments. Sales in each segment are managed at both headquarter level and through regional distribution network for domestic sales (11 offices in major cities) and by SIBUR International GmbH based in Austria for export sales. Additional export sales offices are in Turkey and China.

Principal markets and customers

SIBUR sells its products to customers operating in a variety of industries in 80 countries. As these customers, industries and geographies have different trends underlying supply and demand dynamics for the Group's products, the Group has limited exposure to a single customer, industry or geography. SIBUR benefits from a relatively low customer concentration. In the year ended 31 December 2018 and the six months ended 30 June 2019, the largest customer in the Group's portfolio accounted for 5.2% and 5.7% (including purchases of products and processing services) of the Group's total revenue and the top 10 customers accounted for 26.4% and 30.0% of the Group's total revenue.

The following table sets forth key end-customer industries for the year ended 31 December 2018:

External Revenue from sales to key end- customer industries as % of segment revenue 31 December 2018 Olefins and Polyolefins segment Packaging ...... 39% FMCG ...... 23% Construction ...... 10% Chemicals ...... 10% Hygiene Products ...... 9% Other ...... 9% Plastics, Elastomers and Intermediates segment Chemicals ...... 23% Traders and other ...... 17% Automotive ...... 16% Fuels...... 15% FMCG ...... 15% Construction ...... 14% Midstream segment Petrochemicals ...... 53% Utilities and fuels ...... 28% Traders and other ...... 19%

The following table sets forth customer concentration for the six months ended 30 June 2019 and the year ended 31 December 2018:

% of External Revenue % of External Revenue from sales to top 10 from sales to largest customers customer 30 June 31 December 30 June 31 December 2019 2018 2019 2018 Group's total...... 30.0% 26.4% 5.7% 5.2% Olefins and Polyolefins segment ...... 22.6% 21.2% 7.3% 7.7% Plastics, Elastomers and Intermediates segment ...... 22.9% 19.0% 5.6% 3.3% Midstream segment ...... 58.5% 54.4% 13.1% 12.1%

Spot and term contract sales

The Group sells its products on the spot market and on a term contractual basis. The spot/contract mix varies for different segments and depends on market practice in each particular industry. In - 199-

the six months ended 30 June 2019 and the year ended 31 December 2018, the Group's contract sales accounted for 62% and 61% of the Group's revenue, respectively.

The following table sets forth the contract/spot structure for the segments' sales in the six months ended 30 June 2019 and the year ended 31 December 2018:

Contract Spot 30 June 31 December 30 June 31 December 2019 2018 2019 2018 (% of total segment sales) Olefins and Polyolefins segment ...... 63% 63% 37% 37% Plastics, Elastomers and Intermediates segment ...... 58% 63% 42% 37% Midstream segment ...... 76% 73% 24% 27%

Domestic sales

The Group's marketing efforts and sales to domestic customers are conducted both on a centralised basis, through the Group's headquarters in Moscow, and on a regional basis through the Group's subsidiaries.

The following table sets forth the segments' shares of the Group's domestic revenue for the periods indicated:

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 Olefins and Polyolefins segment ...... 24.2% 21.0% 22.6% 25.5% Plastics, Elastomers and Intermediates segment ...... 29.0% 32.8% 31.9% 33.6% Midstream segment ...... 31.4% 30.0% 32.8% 31.7%

Export sales

The Group sells its products to a broad customer base in more than 80 countries. The Group's major markets include CIS, European and Asian countries, with China being the key export market.

The following table sets forth the share of operating segments in the Group's export revenue for the periods indicated:

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 Olefins and Polyolefins segment ...... 11.0% 13.1% 15.0% 15.1% Plastics, Elastomers and Intermediates segment ...... 30.6% 26.3% 32.9% 29.2% Midstream segment ...... 58.3% 59.8% 51.1% 54.8%

The following table sets out, by revenue, the regions in which the Group's products were exported during the periods indicated:

Six months ended Year ended 30 June 31 December % of % of % of % of export export export export 2019 revenue 2018 revenue 2017 revenue 2016 revenue (RUB millions, except as stated) Europe ...... 82,256 71.1% 179,196 76.2% 135,989 70.9% 117,680 67.6% Asia ...... 17,214 14.9% 26,082 11.1% 29,193 15.2% 28,146 16.2% CIS ...... 12,699 11.0% 25,661 10.9% 23,888 12.5% 22,462 12.9% Other(1) ...... 3,572 3.0% 4,314 1.8% 2,687 1.4% 5,681 3.3% Export revenue ...... 115,741 100% 235,253 100% 191,757 100% 173,969 100% - 200-

______Note: (1) Other includes other export revenue and does not include revenue from sales in Russia.

CAPITAL EXPENDITURE

In line with its strategy, the Group plans to invest approximately RUB 253 billion net of VAT from 2019 to 2022, out of which RUB 146 billion net of VAT was approved by the Board of Directors for 2019. These amounts comprise investment projects approved by the Group's Investment Committee and include capital expenditure to maintain the existing infrastructure as well as the capitalised portion of the Group's expenses related to R&D, organisational and IT projects. These numbers may be revised subject to macroeconomic and market environment. In addition to the approved investment projects, the Group is considering various other investments, including the development of the Amur GCC project involving construction of an integrated facility for production of polyolefins, which is currently in extended basic design stage (see also "— Capital Expenditure — Amur Gas Chemical Complex (Amur GCC)"). These additional projects, if approved by the Group's management, will require the Group to make substantial additional investments.

The following table sets forth the Group's key approved projects and the related capital expenditures for the period from 2019 to 2022:

Total Location Description Currency 2019 2020 2021 2022 2019-2022 (RUB millions, net of VAT) Expansion RUB 53,486 5,552 — — 59,038 USD 507 20 — — 527 Tobolsk ZapSib EUR 161 160 — — 321

Logistics hub for polymers RUB- Tobolsk distribution equivalent 3,432 83 — — 3,515

RUB- Tobolsk MAN production equivalent 1,942 7,802 6,073 — 15,817

New DOTP RUB- Perm production equivalent 1,762 — — — 1,762

RUB- Voronezh TPE expansion equivalent 2,903 810 — — 3,713

RUB- Blagoveshensk PTA expansion equivalent 3,355 — — — 3,355

Amur GCC Extended basic RUB- Amur region design stage equivalent 8,921 — — — 8,921

Maintenance (including catalysts) RUB- equivalent 9,967 5,116 17,928 10,500 43,510

The Strategy and Investments Committee approves limits for total capital expenditure for each project, while the expected budget allocations across periods may be revised by the Group.

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ZapSibNeftekhim

ZapSibNeftekhim is designed to operate (i) a world-scale ethylene cracking unit with an annual capacity of 1.5 million tonnes, that will also produce 525,000 tonnes of propylene and 223,000 tonnes of butadiene and fuel components (technology provided by Linde), and (ii) polyolefin units with an annual capacity of 1.5 million tonnes of PE (technology provided by INEOS) and 500,000 tonnes of polypropylene (technology provided by LyondellBasell). This is a greenfield construction near the Group's Tobolsk production site, and the facility will have direct access to the existing fractionation capacity. Positioned in the first quartile of the global IHS ethylene cost curve, ZapSibNeftekhim is expected to be one of the lowest-cost projects globally with cost advantages driven by low feedstock prices (LPG netback in Western Siberia), economies of scale, as well as low energy and labour costs in Russia. As of 30 June 2019, construction and pre- commissioning works were completed at all technological and production units. For more details on ZapSibNeftekhim status, see "— Overview of Business Segments — Olefins and Polyolefins Segment — ZapSibNeftekhim Investment Project".

The total investment budget for ZapSibNeftekhim project has been revised downwards from USD 9.5 billion to approximately USD 8.9 billion as of 30 June 2019.13 The Group already invested USD 7.4 billion14 as of 30 June 2019, with the residual capital expenditures estimated to be around USD 1.5 billion15. The remaining ZapSibNeftekhim budget will be financed through the Group's own funds (approximately 50%), ECA-backed financing (approximately 35%) and funds provided by the New Development Bank (approximately 15%). See also "Operating and Financial Review — Liquidity and Capital Resources — Capital Expenditures".

Logistic Hub for Polymers Distribution

To provide efficient distribution of polymer products to end-customers, the Group started a project to develop its logistic platform in Tobolsk for the storage, packaging and shipment of polyolefin, and a logistics hub located in the Kaluga Region in partnership with Karl Schmidt Spedition GmbH & Co. KG ("KSS") and Freight Village Kaluga. According to the agreement, KSS is to set up a logistics hub at the Freight Village Vorsino to distribute the Group's polymer products, including those to be delivered from ZapSibNeftekhim. The Group's need for tank wagons will decrease from currently approximately 15,000 (owned/leased) wagons to approximately 8,500 cisterns, primarily through the Group's optimisation of its owned rolling stock. The arrangements in place provide for the receiving, packaging, storing and shipping of the Group's polyolefin products to its customers in Russia and abroad, including Turkey, China and Western Europe, during the 20 years after the hub becomes operational. As of 30 June 2019, commissioning works at the logistics platform in Tobolsk were underway with filling, packaging and dispatch operations conducted in test mode. Commissioning works have been also conducted at the logistic hub in Kaluga.

New maleic anhydride (MAN) production at Tobolsk

In December 2018, SIBUR launched the construction of MAN production facility at the Tobolsk site. With a planned capacity of 45,000 tonnes per annum, the facility is scheduled to go online in 2021. MAN is used in the construction, agriculture, automotive, paint and varnish, furniture, pharmaceutical and other industries. MAN is currently not produced in Russia and domestic demand is covered by imports. Launching the high-margin MAN is expected to enable the Group to monetise its own feedstock (butane), improve the hydrocarbon processing rate in Russia, fully

13 Estimated capital expenditures budget. Converted to USD using historical annual average exchange rates. 14 Calculated using annual average RUB/USD exchange rates and average exchange rates for the first half of 2019. 15 Calculated based on the following exchange rates: RUB/USD at 65.60, RUB/EUR at 74.90. - 202-

substitute MAN imports, and start MAN exports to Western and Eastern Europe and Turkey. The expected total capital expenditure for the project is RUB 16 billion.

New Dioctyl Terephthalate (DOTP) production at Sibur-Khimprom

The Group has constructed a new DOTP, a general purpose plasticiser, which will produce an annual capacity of up to 100,000 tonnes per annum at the Group's production plant in Perm. The project aims to substitute imports of alternative products and launch supplies to export markets, where the demand for DOTP is rapidly growing. As of 30 June 2019, the project was running in a test production mode. The total capital expenditure for the project is around RUB 6.9 billion.

Expansion of thermoplastic elastomers (TPE) production at AO VoronezhSintezKauchuk

The project aims to effectively utilise additional butadiene from ZapSibNeftekhim through the high value-added synthetic rubbers chain – TPE. Once commissioned, the project is expected to double the capacity of TPE from 50,000 tonnes per annum to 100,000 tonnes per annum. As such, the anticipated investment return metrics of TPE-100 is expected to be highly lucrative, with lower fixed costs per tonne, as well as savings and labour productivity growth. TPEs are used in roofing and road construction, compounds, adhesives and polymer modifications. TPE will be mainly sold to European roofing and road construction segments. The project is also expected to allow the Group to enter the fast-growing European compounds and adhesives segments. The project is scheduled for completion in 2020. The expected total capital expenditure for the project is RUB 5.1 billion.

Pure terephthalic acid (PTA) production upgrade at Polief

The Group launched its PTA production upgrade at the Polief site (Blagoveshensk, Bashkortostan) to expand its annual capacity to 350,000 tonnes. The project seeks to improve the site's production efficiency and environmental safety. The Russian PTA market is undersupplied, and the production upgrade should help to substitute a major portion of Russian PTA imports.

The project is designed to upgrade 11 existing production facilities, to renovate 150 units of core production equipment, and most of the ancillary equipment, thus enhancing its industrial safety, reliability and efficiency.

Further, the Group expects substantial improvement of environmental performance of these sites including atmospheric emissions reduction by half, as well as reduction of industrial wastewater discharges. In addition, the production upgrade should prevent excessive evaporation into the atmosphere resulting from extra heat emission during PTA synthesis. The process will also improve energy efficiency, and heat emission will pass through the cooling system and return into the technological process.

The project was completed in August 2019. The total capital expenditure for the project is RUB 6.4 billion.

Amur Gas Chemical Complex (Amur GCC)

In addition to the approved projects, the Group is actively evaluating a new greenfield project involving the construction of an ethane cracker together with polyolefins production – Amur GCC – located in the Amur region close to Gazprom's Amur GPP at the Russia-China border. Currently, the Group is considering two options for configuration of the project. Under first option, the Amur GCC's will be based on ethane feedstock produced by Gazprom's Amur GPP and is expected to include a steam cracker with a total annual capacity of up to 1.5 million tonnes of ethylene and 1.5 million tonnes of PE. The second option assumes an increased capacity of Amur GCC by - 203-

processing LPG produced at Gazprom's Amur GPP (up to 1.5 million tonnes). This would extend Amur GCC production capacity from 1.5 million tonnes of PE to 2.7 million tonnes of polyolefins (2.3 million tonnes of PE and 0.4 million tonnes of PP). In September 2019, the Group and Gazprom signed a preliminary agreement to supply up to 1.5 million tonnes per annum of LPG and ethane fraction. The Group plans to make a final investment decision on the Amur GCC project after completion of the basic design stage, which will be no later than 2019. In case a decision is made to proceed with the Amur GCC project, subject to regulatory clearances, mechanical completion could be achieved by the end of 2024, which is aligned with commissioning of Gazprom's Amur GPP. In June 2019, SIBUR and China Petroleum and Chemical Corporation (Sinopec) signed a term sheet for a potential JV that could be based at Amur GCC. Subject to SIBUR's investment decision, Sinopec is expected to have a 40% share in the JV. Preliminarily investments in the project under initial configuration are estimated at approximately USD 7-8 billion, and this amount will increase in case the extended configuration is approved.

JOINT VENTURES AND ASSOCIATES

The Group partners with leading world and Russian players in the petrochemicals and other industry to monetise its own technologies and expertise and acquire technologies to support the diversification of its petrochemical products portfolio. Set forth below is a summary of the Group's principal projects developed on the basis of international and domestic cooperation.

RusVinyl LLC, a joint venture PVC facility in Kstovo, Nizhny Novgorod, Russia

In June 2007, the Group established a joint venture with SolVin Holding Nederland B.V., a subsidiary of Solvay SA, the Belgian chemical company, in which each of the Group and SolVin Holding Nederland B.V. owns a 50% stake. This joint venture was established to construct a PVC plant with a capacity of 330,000 tonnes per annum for PVC and 225,000 tonnes per annum for caustic soda in Nizhny-Novgorod. The plant began commercial production operations in September 2014.

Yuzhno-Priobsky GPP LLC, a joint venture with the Gazprom Neft Group

In 2007, the Group and the Gazprom Neft Group established a 50/50 joint venture in the Khanty- Mansiysk Autonomous District to construct gas processing facilities. In early 2014, the Yuzhno- Priobskaya compressor station with an annual capacity of 0.5 billion cubic metres of APG began commercial operations. In October 2015, Yuzhno-Priobsky GPP, based on the Yuzhno-Priobskaya compressor station, began its commercial production operations with annual processing capacity of 0.9 billion cubic metres of APG.

NPP Neftekhimia LLC, a joint venture with the Gazprom Neft Group

In September 2010, the Group created a joint venture, NPP Neftekhimia, with OAO Moskovskiy NPZ (later renamed as JSC Gazprom Neft – MNPZ), a member of the Gazprom Neft Group, to increase its presence in the PP market. The joint venture is a PP producer located in the City of Moscow with a capacity of 140.7 thousand tonnes per annum as of 30 June 2019. The Group owns a 50% stake in the joint venture, while the remaining 50% is controlled by the Gazprom Neft Group.

Sibgazpolimer JSC, a joint venture with the Gazprom Neft Group

In 2014, the Group, Gazprom Neft and Titan Group, the Siberian company that invests in petrochemical, agricultural and infrastructure facilities, signed an agreement to establish Poliom, a joint venture based on the Omsk PP Plant. As part of the deal, Sibgazpolimer, a joint venture of

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the Group and Gazprom Neft (each with a 50% stake), acquired a 50% stake in Poliom from Titan Group. In July 2019, SIBUR and Gazprom Neft have consolidated 100% of the authorised capital in Poliom and signed an agreement to acquire a 50% stake in Poliom from the Titan Group. The plant has a capacity of 218,400 tonnes per annum as of 30 June 2019. The Group sells Poliom's products through its distribution network.

Reliance Sibur Elastomers Private Limited, an associate for butyl rubber (IIR) production in India

In February 2012, the Group formed a partnership with Reliance Industries Limited to seize the opportunities within the growing synthetic rubber industry. This has led to the formation of Reliance Sibur Elastomers Private Limited, an associate of the Group in which it owns a 25.1% stake. This associate is to set up South Asia's first butyl and halogenated butyl rubber production facilities at Jamnagar, India with the capacity of 120,000 metric tonnes per annum. As of 30 June 2019, the construction of the regular IIR plant is complete, with production expected to commence by the end of 2019. The project is part of the ongoing Jamnagar expansion programme of Reliance Industries Limited, and is tied in with the overall programme execution schedule. This joint venture is an example of the Group expanding its technological capabilities abroad. The expected total capital expenditure for the project is USD 151 million, or 25.1% of the project's total budget of USD 600 million.

Petrochemical Transportation Company joint venture with SG-Trans

COMPETITION

The Group competes with other energy and petrochemical companies primarily on the basis of pricing, delivery times, and product and service offerings. Most of the Group's products are commodity grade, and competition for such products is principally based on price. Competition for the Group's more specialised petrochemical products is based on quality, performance, manufacturing flexibility and other factors. The priority of taking these factors into account is based on the needs of particular customers and the characteristics of specific products.

The global market for commodity energy products, such as LPG and naphtha, is highly liquid and fragmented, and the Group competes with many international producers of these products on its export sales. Domestically, the Group's main competitors in sales of LPG, naphtha and natural gas are major Russian oil and gas companies.

The Group sells a variety of petrochemical products, and the competitive environment varies across its products. On export sales of polyolefins, the Group's principal competitors include LyondellBasell, SABIC, Dow Chemical, BASF, Borealis and local CIS producers. In export sales of plastics and organic synthesis products, the Group's principal competitors include Dow Dupont, SABIC, ZAK, and Shell Chemicals. In elastomers, the Group competes with a number of global producers such as Arlanxeo (a joint venture between Lanxess and Saudi Aramco) and Kumho.

In Russia, the Group's principal competitors in petrochemicals are Nizhnekamskneftekhim and Kazanorgsyntez (both controlled by the TAIF Group), Synthez-Kauchuk, as well as petrochemical

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subsidiaries of Russian oil and gas producers, including LUKOIL, Rosneft and, to a lesser extent, Gazprom.

RESEARCH AND DEVELOPMENT (R&D)

The Group's R&D activities are designed to develop business opportunities for the Group and aimed at increasing the efficiency of existing production, as well as expanding its product range, in particular through the development of new grades of polyolefins, elastomers and other products. In addition, the Group carries out strategic research aimed at creating new technologies and products for the industry. The Group's R&D programme is being primarily implemented on the basis of two corporate R&D centres, in Tomsk and Voronezh, as well as at R&D center (SIBUR PolyLab) at Skolkovo, Moscow region, and the research departments of production subsidiaries. The Group's R&D programme includes the following areas of focus:

• Product Portfolio Expansion and Upgrading: development of new, higher-margin grades produced by the Group (PP, PE, PET, PS, elastomers) along with the search for high- potential product niches;

• New Products and New Technologies: search for, and analysis of, ideas for new businesses, development of the Group's own technologies for new products without licensors;

• Process and Technology Optimisation: increased efficiency of technologies and processes used at the Group; production process analysis, analysis of ideas, implementation of R&D projects and transfer of standardised solutions.

Research organisation NIOST in Tomsk is the Group's subsidiary which serves as an R&D centre for chemical technologies. Real production processes are simulated in NIOST's laboratories. NIOST is responsible for (i) R&D in organic synthesis and catalysis, plastics and associated compounds, (ii) testing alternative feedstocks and materials at the Feedstock and Material Qualification Centre ("FMQC"); (iii) functional management of the Group's scientific units.

The Voronezh R&D centre was established on the basis of the scientific and technical centre of AO VoronezhSintezKauchuk ("VoronezhSintezKauchuk"). The primary aim of this R&D centre is (i) R&D in synthetic rubbers (SSBR, PBR, SSR) and (ii) technical support for operations at VoronezhSyntezKauchuk and FMQC.

In April 2017, the Group and the Skolkovo Foundation signed an agreement to create an R&D centre for the development and application of polyolefins at the Skolkovo Innovation Centre. In May 2019, this R&D centre (SIBUR PolyLab) was opened. At SIBUR PolyLab, the Group is planning to develop and test new materials and new product solutions, to make samples of products for subsequent testing, analysing and refining their properties, and to explore opportunities of increasing the efficiency of polyolefin processing technology. Further, the Group plans to use this R&D site to customise materials to meet customers' needs and increase mass production of new grades.

When appropriate, the Group seeks to register rights to intellectual property that result from its research and development. See "— Intellectual Property" below.

INTELLECTUAL PROPERTY

As of 30 June 2019, the Group owns approximately 239 patents for inventions and utility models in Russia and approximately 31 patents for inventions abroad. The Group also has approximately 10 pending applications for inventions in Russia and approximately 118 pending applications for - 206-

inventions abroad, including international patent applications filed under the Patent Cooperation Treaty procedure ("PCT"), both on international and national stages. The Group's patents for inventions and utility models are aimed at protecting new production technologies and the improvement of the Group's products quality.

In addition to its patents, the Group owns the brands "SIBUR" and "СИБУР" ("SIBUR trademarks"), which are protected by approximately 20 trademark registration certificates in Russia. The brand "SIBUR" is registered in approximately 116 countries and was also submitted for registration in approximately 32 countries. Altogether, the Group has registered approximately 122 trademarks in Russia and more than 110 trademarks abroad (including international certificates under the Madrid Agreement Concerning the International Registration of Marks of 1891 (the "Madrid Agreement")), which are used for marketing the Group's products and services. These trademarks are valid for a period of 10 years and could be renewed after the validation period. The Group also has approximately 8 pending trademark registration applications in Russia and approximately 30 pending trademark registration applications abroad (including international applications under the Madrid Agreement).

In addition to using technologies and processes developed and owned by the Group, the Group utilises advanced manufacturing technologies and processes licensed to the Group by various technology providers, including UOP and INEOS.

The Group believes that its intellectual property is important for its production processes and product quality. The Group recognises the importance of protecting and enforcing its intellectual property rights and also monitors potential intellectual property infringements in Russia and other countries. However, there can be no assurance that the Group's intellectual property rights will not be infringed. See "Risk Factors — Risks Relating to the Group's Business — The Group may not be able to protect adequately or enforce its intellectual property rights".

INFORMATION TECHNOLOGY

The Group's information technology ("IT") infrastructure is based on SAP ERP for some subsidiaries of the Group, and covers the main processes of business and production activities. The Group uses SAP BPC for management reporting and IFRS and for EBITDA forecasting. SAP ERP and 1C are used for Russian tax treatment and accounting and Boss Kadrovik is used for payroll calculation. For supply chain management, Aspen Tech is implemented and integrated with SAP ERP. The Group's supply chain management optimisation system (SCM system) is an information technology system based upon the AspenTech Distribution planning optimiser (currently the Aspen Petroleum Supply Chain Planner), an industrial solution system, designed to help the planning of the Group's production and distribution flows through generating solutions to transport optimisation problems. Inputs storage and management, as well as the export of the optimisation results, are organised through the Group's in-house developed planning database, based on the Oracle E-Business Suite ERP. The SCM system allows the Group to maximise its marginal income throughout its whole balanced business model. It encompasses all of the Group's plants and optimises production and distributions plans given multiple assumptions, including feedstock availability, distribution channels and prices, production yields and restrictions, and available transportation routes and costs. The Group's SCM system is used for short and midterm planning and is integrated into the Group's IT system.

The IT function of the Group provides uninterruptable operation of information systems and maintains continuous data back-up. There is personnel training to restore working capacity in extraordinary situations according to the disaster recovery plans, which are followed by planned and unscheduled inspections. The IT function maintains continuous monitoring of performance and availability of information systems. As of the date of publication of this Offering - 207-

Memorandum the Group has had no critical incidents in its IT systems and infrastructure. The IT function fully meets the Group needs, including communication systems, and provides flexible and rapid scaling of the infrastructure for the Group's growing business. The IT function also introduces innovative digital technologies aimed at improving personnel effectiveness and performance and to guarantee the required level of product quality.

The Group has also implemented IT solutions at the level of its production facilities, from major international IT companies such as Yokogawa, Honeywell, AspenTech and GE, to control production at these sites.

Digitisation

The Group launched its digital transformation programme in 2017, when it established two departments whose purpose was to drive the Group's digitisation efforts.

The first department, Digital Technologies, was established to identify and develop digital projects, while the second department, the Corporate Data Management Centre, was established to leverage the Group's data.

Key principles of the Group's digitalisation include:

• introduction of the most effective digital technologies successfully tested in the market;

• technology applicability assessment based on speed of implementation and positive economic impact;

• application of flexible project management techniques to secure maximum benefit;

• fostering a proprietary software development culture; and

• focus on ability to implement these tools and cultural transformation.

The Group is now concentrated on three key areas for its digital projects: (i) advanced analytics; (ii) digitisation of processes; and (iii) Industry 4.0. The advanced analytics team is focused on the application of data science to improve operational efficiency and ensure quality decision-making in the Group's industrial processes. Using visualised data models and other advanced instruments like artificial intelligence and machine learning for predictive maintenance gives the Group better production control and prevention of unplanned equipment shutdowns. Overall, the Group currently has over 80 various digital initiatives at different stages of implementation, with the ambition to replicate the identified best practices across the whole organisation. The digitalisation of processes involves the simplification and optimisation of existing business and industrial processes through digital platforms in order to increase transparency, efficiency and user satisfaction.

The list of the Group's ongoing projects in the area of digitising of processes includes the following: (i) the digitisation of work permits (a mobile application to support daily equipment audits), (ii) "digital twin" railway station (management tool for optimal planning of shipments and repair management which is aimed at decreasing the number of tanks in operation and thus reducing transportation and maintenance costs), (iii) mobile rounds and repairs (management tool which is aimed at increasing the proportion of detected defects at an early stage and decreasing the number of unplanned equipment shutdowns; as a result, the productivity of inspectors and machinists is expected to be improved), and (iv) a project dedicated to improving customer experience on the on-line sales platforms. - 208-

The list of the Group's ongoing projects in the area of Industry 4.0 includes the following: (i) leveraging the "industrial internet of things" ("IIoT"), the direct integration of physical industrial operations with digital technology, to increase efficiency in different areas, including the application of smart gadgets and IIoT sensors for remote equipment control, the use of augmented reality and virtual reality hardware to train personnel, or intellectual video monitoring to prevent unplanned equipment stoppages and reduce maintenance time, (ii) remote expert platform (which is aimed at speeding up work and improving quality of work performed through advice from remote experts with the necessary content displayed on the glasses), and (iii) remote- piloted vehicles (provides high-quality visual monitoring of pipeline conditions and is aimed at increasing industrial safety and eliminating risks associated with human factors).

RISK MANAGEMENT AND INSURANCE

Risk management is an important element of the Group's corporate strategy, involving a constant cycle of identification, assessment and mitigation of near-term and long-term risks that could affect the Group's performance, value and ability to conduct business. The Group continuously seeks to improve its risk management system and properly mitigate risks arising from its business operations and strategic development.

The Group's risk management system includes identifying and analysing risks affecting the Group's strategic goals, developing a proposed action plan to respond to such risks, and implementing and monitoring the action plan. As part of the Group's risk management system, the Group's key risks are continuously monitored, while risk owners report on the status of risks annually at the meetings of the Audit Committee of the Board of Directors. Key risks and related response strategies are reviewed by the Company's Management Board, approved by the Board of Directors and discussed at the meeting of the Company's Audit Committee.

In 2018, the Company's Management Board identified the following as the key risks faced by the Group: operational, market, IT systems, feedstock undersupply, logistical, investing activity, industrial accident and regulatory risks as well as risks to the Company's long-run financial sustainability.

Operational risks include decreased production volumes, deterioration in product quality, increased operating expenses on production resulting from malfunction or shutdown of production processes, equipment failures or reduced operating efficiency of equipment. To reduce the impact of operations risks, the Group is rebuilding and modernising its facilities, organising continuous operations and equipment condition monitoring, introducing advanced methods to maintain and upgrade fixed assets, undertaking projects designed to enhance the skills of workers who operate equipment, and protecting against production interruptions and unplanned production outages at the Group's key facilities.

Market risks include reduced demand and/or lower prices for the Group's products, including lower prices for oil and petroleum products, increased market competition, and displacement of the Group's products by alternative products. Market risk management is being carried out by the Group in several areas: market monitoring and analysis; market segment diversification; product portfolio development; geographic diversification for product sales; conclusion of long-term sales contracts for finished products; fulfilment of customers' product quality, transportation, labelling and packaging requirements; development of a sales system and sales channels to account for expanded production capacity and undertaking premarketing activities.

IT systems risk include failure of key information systems and equipment, unauthorised access to information, and corruption of information during transmission. To manage these risks, the Group

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continues to develop information backup systems, as well as systems to protect information, channels and communication equipment from external intrusion.

Feedstock undersupply risks include insufficient supply of feedstock on the market or a shortage of individual feedstock fractions and low quality of feedstock. To manage these risks, the Group is taking the following measures: (i) locating production facilities in close proximity to feedstock producers; (ii) implementing projects to pursue further extraction and develop the feedstock base; (iii) investing in infrastructure to collect, process and transport feedstock in order to consolidate the flow of hydrocarbon feedstock and ensure reliable access to the feedstock base; (iv) signing long-term feedstock supply contracts; and (v) diversifying feedstock suppliers where possible.

Logistical risks include increased logistics costs; changes in the timing of feedstock and finished product delivery; changes in product quality during transport, loading, unloading, and storage; and suboptimal meeting of production requirements with existing inventories. To mitigate these risks the Group is developing alternative transport routes, taking measures to create and/or update infrastructure facilities, and developing comprehensive long-term solutions to logistics challenges together with Russian Railways and the Russian Government.

Investing activity risks include increased timing and cost of investment project implementation, as well as failure to broadly achieve investment activity performance measures. In order to mitigate these risks the Group forms a contract strategy at the early stages, develops schedules to mobilise contractors based on performance and workload, and plans and adjusts workflows based on the actual supply of materials.

Industrial accident risk includes a danger to people's life, health and safety; damage or destruction of equipment, buildings and installations; and pollution caused by use of the Group's assets and as a result of possible accidents at related enterprises. The Group is taking active steps to minimise the potential impact of such risks. In particular, sites are monitored continuously for emergency risk factors, and projects designed to improve industrial safety culture and safeguard property are underway.

Regulatory risks include changes in the regulatory environment (laws, standards and regulatory requirements); political instability in Russia and the regions where the Group operates, as well as international sanctions. In order to manage these risks the Group uses an information analysis system to monitor counterparties and the regulatory environment in order to develop timely responses to changes in legislation, consults and trains employees on legal issues, and actively participates in discussions of draft legislation.

Long-term financial sustainability risk means that the Group's business and operational results may be negatively affected by lower demand or reduced prices for its products, changes in consumers' requirements, higher competition as well as market share losses in its key markets. These factors may negatively affect the Group's operational and financial results. To mitigate this risk the Group undertakes the following actions: RDIF credit covenants have been aligned with Eurobond conditions; active portfolio management, including early loan repayment; expansion of credit instruments using state support (financing from the Monocity Development Fund); access to the rouble bond market secured.

To mitigate operational risks, the Group maintains insurance coverage that meets global standards and best practices. Insurance policies are underwritten by reputable Russian insurance companies, with partial placement of risks on international insurance and reinsurance markets.

All of the Group's production facilities are covered under comprehensive property damage ("PD") insurance programmes. PD insurance is maintained for full replacement value based on an - 210-

independent valuation. An independent surveyor identifies risks at each production facility. Based on the surveyor's reports, estimated maximum losses are determined, and the Group then implements and monitors compliance with the surveyor's recommendations.

For facilities where accidents could result in the largest financial impact and replacement costs, the Group maintains insurance coverage against PD and business interruption ("BI").

The Group also maintains liability insurance for harm to the life, health, or property of third parties. This liability policy is supplemental to the compulsory insurance of hazardous production facilities, to provide efficient coverage against possible third-party claims resulting from accidents and risk occurrences at the Group's production sites.

The Group also maintains directors and officers ("D&O") liability insurance that protects the Group and its directors and officers against possible third-party lawsuits that may arise from unintentional and/or erroneous actions. To protect its trading operations and risks to product supplies on extended payment terms, the Group maintains comprehensive cargo and credit insurance programmes.

Additionally, the Group maintains insurance coverage for construction risks at its major investment projects, including risks related to construction, third-party liabilities, cargo transportation and financial losses resulting from delays in commissioning of new facilities due to material damage or destruction of insured objects.

The Group regularly reviews the terms of its insurance coverage and relationships with reinsurance market players. Reinsurance is provided by major reinsurance companies with a credit rating of "A-" or better on the S&P Global Ratings' financial strength rating scale.

The Group believes that insurance coverage is only one of the risk mitigation actions it must take as part of a comprehensive risk mitigation approach and works to implement other measures to decrease its maximum cumulative risk.

The Group also believes that its current insurance arrangements comply with insurance requirements under Russian law and are in line with industry practice, but cannot guarantee that its insurance coverage will be sufficient. See "Risk Factors — Risks Relating to the Group's Business — The Group's existing and future insurance coverage may not be sufficient and may not adequately protect it against certain operating hazards".

INTEGRATED MANAGEMENT SYSTEM

SIBUR is committed to ongoing and sustainable growth. Among the Company's top priorities is mitigating its negative impact on both staff and consumers along with reducing its environmental footprint.

To boost performance in line with global best practices, in 2016 SIBUR implemented an integrated management system ("IMS") based on the following international standards:

• OHSAS 18001 (Occupational Health and Safety Management) underpins the priority of health and well-being of the Group's personnel and of all stakeholders over operating performance;

• ISO 9001 (Quality Management) supports product quality risk mitigation and identification of opportunities for continuous process and overall system improvements;

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• ISO 14001 (Environmental Management) is the basis for developing the Group's environmental performance and environmental risk management system;

• ISO 50001 (Energy Management) supports SIBUR's energy efficiency improvement programmes; and

• ISO/TS 16949, a technical specification setting forth particular requirements for the application of ISO 9001:2008 in automotive and component production.

The Group has developed the Integrated Management System Policy (the "IMS Policy"), document that codifies the Group's principles and guidelines on HSE, product quality and energy efficiency to ensure consistency and drive improvements across the Group. The IMS Policy has been revised by the Board of Directors in February 2019.

According to IMS Policy, IMS strategic objectives in HSE, quality and energy efficiency area are:

• providing safe and healthy working environment;

• reducing accident risks;

• providing stable manufacturing of competitive quality product that meet consumer requirements;

• reducing the environmental impact, preventing environmental pollution in balance with socio-economic needs, resource management;

• preventing emissions of polymer granules, flakes and powder;

• increasing the energy efficiency of production processes and minimising inefficient energy use, reducing the cost of energy procurement and generation.

When planning its operations, the Group gives priority to ensuring the safety of its employees and residents of areas surrounding its operations; preventing accidents and work-related illnesses; and preventing pollution and reducing the environmental impact of the Group's activities. The IMS Policy is a benchmark for each of the Group's employees, serving as a basis to set HSE targets and shape further action to meet them. For more information, see "— Health and Safety" below.

COMMUNITY DEVELOPMENT

Charity and social investments are an important part of the Group's operations. The Group partners with regional and municipal authorities in the regions of its operations to define priorities and implement important projects. Several regions have special social partnership agreements with SIBUR: in 2016, such agreements were signed with regional authorities of the Khanty-Mansi Autonomous Area, Yamal-Nenets Autonomous Area and Tomsk Region.

On 1 February 2016, the Group officially launched its corporate charitable programme "Formula for Good Deeds", which brings together all of the Group's social initiatives. The programme operates in 17 cities where the Group is present and is organised into six work streams:

• Urban development: the Group is engaged in the reconstruction of social institutions, improvement of the urban landscape and the development of sports infrastructure in the regions where it operates; - 212-

• Education and science: the Group takes a systematic approach to the development of science and technical education by providing financial support to educational institutions, encouraging the popularisation of the natural sciences and organising career guidance projects;

• Sports and healthy lifestyle: the Group provides an integrated approach to supporting sports and a healthy lifestyle – from the reconstruction of sports facilities and the development of the coaching corps to seasonal festivals with the participation of world and Russian sport stars;

• Environmental protection: the Group pays attention to projects in the field of environmental education and nature conservation in partnership with representatives of environmental organisations, non-profit organisations and eco-activists;

• Culture: the Group organises cultural leisure activities and creates opportunities for cultural development, while also encouraging the creation of local competitive cultural products; and

• Volunteering: special attention is paid to the corporate volunteering development programme, which was launched in September 2017 in order to unite the Company, its employees and city residents around universal values and involve them in joint socially significant projects.

Formats of interaction and support for local communities through the "Formula of Good Deeds" remained unchanged in 2018: grant system, inter-regional projects and corporate volunteering.

The Formula for Good Deeds programme's grant system and the project-based approach have made it possible to considerably improve the transparency and efficiency of the Group's social investments, and to raise its relations with partners and counterparties to a new level. In 2018, the contest of public-interest projects received 519 applications from 15 of the cities where the Group has its operations. Around 120 projects emerged as winners. As well as the standard selection process, the residents of Tobolsk were asked to vote for those projects of city-wide significance. Out of more than 110 projects applied for, the residents chose 13 which ultimately received financial backing from the Group.

In addition to the projects selected in the course of the contest, the Formula for Good Deeds programme serves as a platform for implementing inter-regional projects spanning several of the regions where the Group has established its presence allowing it to focus on the most pressing development priorities in a comprehensive manner. Total budget for inter-regional projects exceeded RUB 210 million. The corporate volunteering programme is being implemented through several formats, such as a grant contest for volunteers, company-wide events, social media groups, and educational activities. All of these are designed to help support those important initiatives that are spearheaded and implemented by SIBUR's employees for the benefit of their communities. In 2018, around 5000 employees participated in volunteering activities.

One of the Group's most notable projects in 2018 was #BASKETBOTTLE, launched by SIBUR and the VTB United League in the 2017/18 season. SIBUR takes part in the "Sort Right" federal programme run by the Ministry of Natural Resources and Environment of the Russian Federation (the "Ministry of Natural Resources"), which aims to raise public awareness of proper waste disposal. As part of the #BASKETBOTTLE environmental initiative, SIBUR began teaching fans to sort garbage, primarily plastic bottles. The programme was not limited to educational lectures - 213-

or booklets but turned everything into a game and competition: each team collected plastic trash in the arena, and its successes were recorded in a pivot table. Then the collected plastic was sent for recycling. The initiative was taken up by #BULLETBOTTLE in partnership with the Kontinental Hockey League and #HANDBOTTLE in partnership with the Spartak handball club, both launched in 2019. Over a period of two years, 15 tonnes of plastic bottles have been sent for recycling. One of the things made from these bottles is the first eco-friendly basketball. It was created by SIBUR together with Wilson and became the official ball of the VTB United League championship in the 2018/19 season. The ecoball is made from composite material obtained as a result of high-tech processing of plastic bottles, and it possesses all the quality characteristics of the balls used in professional basketball leagues. Two 1.5-litre plastic bottles are required to manufacture one ball.

ENVIRONMENTAL ACTIVITIES

The Group is subject to laws, regulations and other legal requirements relating to environmental protection, including those laws and regulations governing the discharge of substances into the air, and soil, and the management and disposal of hazardous substances and waste.

Petrochemical products have environmental advantages and leave a smaller carbon footprint compared with alternative materials, including lower electricity consumption and lower CO2 emissions. Processing of APG into a source of raw materials for polymers, elastomers and plastics to some extent reduces environmental damage, including the greenhouse gas emissions, associated with its disposal. The Group's GPPs processed approximately 21.9 billion cubic metres, 22.3 billion cubic metres and 22.3 billion cubic metres of APG in the years ended on 31 December 2016, 2017 and 2018, respectively, and approximately 11.0 billion cubic metres of APG in the six months ended 30 June 2019. According to independent experts (Methodology for Calculating Emissions of Pollutants Attendant to Associated Petroleum Gas Flaring, Research Paper authored by the Free Air Protection R&D Institute of the Ministry of Natural Resources, 1997), the flaring of one million cubic meters of APG emits 300 tonnes of air pollutants, including nitrogen oxide, soot, carbon monoxide and other toxic substances. In 2018, APG processing at SIBUR enterprises (including third-party volumes processed at SIBUR's capacities) was 22.8 billion cubic metres, preventing about 7 million tonnes of harmful emissions from entering the atmosphere, and 72 million tonnes of CO2 equivalent. As a result of its operations, the Group itself emits greenhouse gases. In 2018, the Group's direct greenhouse gas emissions was 6.5 million tonnes with the majority comprised by CO2. This virtually creates a negative CO2 footprint.

The Company's key environmental protection initiatives include: (i) construction of new and modernisation of existing treatment facilities and equipment; (ii) measures to reduce emissions into the atmosphere; (iii) increasing the share of recycled and used waste; (iv) improving production safety and calculations of greenhouse gases; (v) improving the Group's environmental management system (compliance with the ISO 14001 international standard); and (vi) cooperation with state bodies and international organisations in terms of environmental safety and use of best practices.

The Group's Compliance Management System includes the flowing main streams of the environment protection: (i) Conservation of Water Resources, (ii) Air Protection and (iii) Waste Treatment.

As part of the Group's Conservation of Water Resources stream the following key measures were implemented to reduce pollutants in waste-water discharge:

• a number of the Company's sites carry out waste-water treatment using their own biological treatment facilities and chemical systems for the preparation of source water; - 214-

• monitoring of the effectiveness of the treatment facilities and the quality control of waste water, surface and groundwater, as well as monitoring compliance with the established volumes of water consumption and waste water;

• at the end of 2018, a biological treatment plant was opened at the Group's Perm site. Waste- water treatment plants were rebuilt in order to ensure high-quality treatment. In addition, following the launch of the new wastewater treatment plants, the Group plans to reduce the load on municipal wastewater treatment plants to create reserve capacity and to provide opportunities for other businesses in the city; and

• technical upgrades of waste treatment plants at Yuzhno-Balyksky GPP, commencement of the reconstruction of industrial waste-water treatment facilities at Polief, and technical upgrades of the mechanical waste-water treatment unit at SIBUR Togliatti.

As part of the Group's Air Protection stream the following key measures were implemented to reduce emissions of air pollutants:

• technical upgrades of gas cleaning units at Polief, industrial emission sources at production sites at Sibur-Neftekhim were equipped with samplers, and reconstruction of production scrubbers at SIBUR Togliatti; and

• VoronezhSintezKauchuk received a new mobile laboratory for monitoring the state of the environment. The mobile laboratory monitors the quality of atmospheric air on the border of the facility's sanitary protection zone; it also conducts monitoring in the impacted zone and other residential areas of the city.

The Group's activities in the field of Waste Treatment in 2018 were aimed at complying with applicable legislation and optimising the process of waste treatment in order to reduce the negative impact on the environment. The Group's waste mainly comprises low-hazard environmental waste (hazard classes 4 and 5). Separate collection of waste for its further disposal is arranged at the Group's production facilities: almost all plants have installed containers for separate collection of household plastic and paper. All waste is transferred to licensed contractors for disposal, neutralisation or placement in specially equipped landfills. At the same time, part of the waste is sent for recycling or is transferred as by-products.

According to IMS, the Group's environmental policy focuses on minimising its environmental impact by preventing pollution while maintaining a balance between socio-economic needs, the environment and the rational use of natural resources. The Group's environmental impact index, an average indicator of the specific load on the environment as a ratio of all types of impacts (emissions, discharges and waste) to the volume of production, has decreased from 7.2 in 2012 to 3.5 in 2018. At each of its production facilities, the Group has been developing and implementing annual and long-term environmental protection programmes in order to minimise the environmental impact of its operations.

In April 2008, the Group implemented its Environmental Management System compliant with international ISO standard 14001:2004. In April 2017, a recertification audit was carried out by BUREAU VERITAS Certification Rus JSC and the Group's compliance with requirements for the ecological management system was recertified. The Group's Compliance Management System includes water protection, waste management and air protection streams. On February 2016, the Group officially launched its corporate charitable programme "Formula of Good Deeds", which also includes an environmental stream and supports various environmental activities. - 215-

As part of the IMS, the Group is implementing an ISO 50001-compliant energy management system. In April 2017, a recertification audit was carried out by BUREAU VERITAS Certification Rus JSC, and the Group's compliance with requirements for the energy management system was recertified. All of the Group's production sites develop near-term and long-term energy efficiency programmes to improve the energy efficiency of their production.

In April 2018, the pan-European trade association PlasticsEurope published a report on its Operation Clean Sweep international programme designed to prevent the loss of plastic pellets into the environment during production and logistics processes. It involves more than 500 companies that account for around 98% of the plastics value chain. SIBUR joined the programme in 2018 and piloted PlasticsEurope's recommendations at its Tver, Perm and Tobolsk sites. It scrutinised existing and potential sources of plastic pellet losses, drew up action plans to eliminate them, procured additional equipment and supplies, updated instructions and held training sessions for employees. These measures helped to prevent the loss of 186 tonnes of plastic pellets into the environment, with 86% going back into the production cycle and the rest being disposed of as required. In early 2019, the requirements of Operation Clean Sweep were incorporated into the Group's IMS Policy by a resolution of the Company's Board of Directors and is planned to be implemented across all of the Company's facilities over the next two years.

The Group has developed and implemented several energy consumption efficiency improvement measures, including regular benchmarking and energy audits at its production sites, the search for and implementation of best energy saving practices, and the assessment of energy saving potential and raising the efficiency indices to the world average.

The Group's activities on environmental protection is vertically integrated. The Health, Safety and Environmental Department of the Management Company coordinates environmental activities of all Group production facilities with each production facility having its own department for environmental protection.

The Group is in compliance with the REACH Regulations.

The Group believes that it is in material compliance with the applicable requirements of current Russian environmental legislation.

SUSTAINABILITY

Sustainability has always been a top priority area for the Group: it monitors and improves its sustainability performance, and annually discloses it in sustainability reports. The Group's activities are based on the IMS that is compliant with ISO 9001, ISO 14001, OHSAS 18001 and ISO 50001 standards.

In 2018, the Committee on Ecology, Sustainability and Social Investment (the "Sustainable Development Department") was created at the level of the Management Board to enforce the involvement of the Group's top-management in sustainability. The Sustainable Development Department is organised to provide integrated improvements in the environmental, social and governance area ("ESG").

In 2018, the Group has prepared its Sustainability Report in accordance with the Global Reporting Initiative standards and was subject to independent assurance with respect to data on the Group's direct and indirect greenhouse gas emissions. The Group is seeking opportunities to reduce its carbon footprint and investing into low-carbon technologies. In 2019, the Group has integrated sustainability metrics (including greenhouse gas emissions) into its investment process: the level of greenhouse gas emissions of a perspective investment project could become one of the main

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arguments either for or against its implementation. In 2019, SIBUR-South, the Group's corporate resort, has been equipped with a rooftop photovoltaic power station with a total capacity of 471.5 kW.

Currently, the Company is completing the process of integrating sustainable development goals into its business strategy and development plans of each enterprise. These goals will include long- term targets for waste, pollutants and greenhouse gas emission reduction, fresh water consumption and increase in electricity consumption from renewable energy sources. The Group makes efforts to implement the circular economy approach through R&D, investment and educating projects in the field of plastic waste recycling. The Group is currently considering the first major project aimed at production of PET with up to 25% of recycled material content.

The Group is a member of several international environmental initiatives, such as PlasticsEurope, Responsible Care, UN Global Compact, TCFD, and is compliant with REACH Regulation (see "Regulation of Gas Processing and Petrochemicals Business in Russia — EU REACH"). The Group's sustainability performance is assessed by several international ratings and analytical agencies, including MSCI, Ecovadis, Sustainalytics and CDP.

HEALTH AND SAFETY

As the largest integrated gas processing and petrochemical company in Russia, SIBUR understands its social responsibility and places a special emphasis on the issues of occupational, industrial and environmental safety, as well as on the fostering of a favourable social environment in the regions where it operates.

The health and safety of its workers are priorities for the Group. Consequently, ensuring workplace safety is viewed as one of the most important objectives in the process of planning and implementing the Group's industrial operations. Managers of all levels are particularly focused on the management of occupational risks impacting the life and health of workers and affecting the Group's property, plant and equipment.

The Group's occupational and industrial safety strategy is developed with a view to complying with the requirements set in state normative acts and operating in line with the best standards of the world petrochemical industry leaders. The Group implements a body of measures aimed at lowering the injury rate amongst the Group's employees and contractors alongside with preventing accidents and casualties.

Since 2012, SIBUR has implemented an upgrade programme to improve safety at hazardous industrial facilities. SIBUR-Khimprom has developed and implemented a pilot project with Rostekhnadzor for the remote control of hazardous industrial facilities. As of 31 December 2018, the number of hazardous industrial facilities was 148, a 5% decrease compared with 156 in 2017.

The Group's production facilities are large industrial sites staffed with a large number of workers, and workplace safety issues are of significant importance to the operations of these sites. In the first half of 2019 and in 2018, 2017 and 2016, 12, 24, 29 and 51 accidents, respectively, were registered involving the employees of the Group and its contractors. Five fatal incidents involving the Group's subcontractors have occurred in 2018, and one and zero in 2017 and 2016, respectively. Three fatal incidents, two of which involved the Group's subcontractors, have occurred in the first half of 2019. The main causes were human error together with insufficient control and training by the subcontractors. All incidents – from major accidents to those that are potentially hazardous – that occurred at the Group's facilities were thoroughly investigated, their causes established, and measures taken to prevent such incidents from recurring in the future.

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In accordance with its long-term goals, the Group strives to improve its LTIF from year to year. Including injuries of contractors, the Group's LTIF was 0.30 in 2016, 0.36 in 2017 and 0.37 in 2018, a significant decrease on the Group's LTIF for the years ended 31 December 2014 and 2015, which were 0.98 and 0.85, respectively. For the six months ended 30 June 2019, LTIF was 0.43.

The Group maintains the Corporate Programme for Development of Safety Culture and Industrial Safety and Occupational Health & Safety Management Systems. Launched in 2008, these systems cover all of the Group's employees as well as employees of the Group's contractors. This programme includes:

• cascading HSE KPIs throughout the business, and assigning individual HSE contracts and accountability to the managers of the Group's subsidiaries;

• promoting industrial safety and health and safety culture amongst all of the Group's employees at every level;

• implementing an industrial accident risk management system, and a health and safety risk management system;

• implementing a programme aimed at the modernisation of hazardous production facilities;

• internal investigations of all reported accidents and subsequent corrective follow-up action;

• education and competence development on HSE matters;

• providing employees with special clothing and equipment; and

• organising medical assistance at each production site.

The Group believes that the most efficient way to promote industrial and occupational safety at the Group's production facilities is to make the Group's employees part of the corporate industrial and occupational safety management. Since 2008, the Group has significantly increased the transparency of its incident reporting systems, reducing its incident rates.

Health and safety issues are the subject of constant attention of the Group's employees, contractors, regulators and other stakeholders. Starting from 2015, the Group has been operating a 24-hour health and safety hotline – enabling employees and contractors to report health and safety issues, working conditions posing an immediate danger to life and health, potentially hazardous incidents and successful practices and initiatives – directly to the Group's management. The Group believes that it is in material compliance with applicable requirements of the current Russian legislation in relation to the occupational health and safety. See "Regulation of Gas Processing and Petrochemicals Business in Russia — Health and Safety" for a discussion of these requirements.

EMPLOYEES

Overview

As of 30 June 2019, the Group had 26,528 employees, of which approximately 14% were employed by the Midstream segment, 15% by the Olefins and Polyolefins segment, 32% by the Plastics, Elastomers and Intermediates segment and 39% in logistics, sales, marketing and other.

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The following table sets out the total number of employees of the Group by segments for the periods indicated:

Six months ended 30 June Year ended 31 December 2019 2018 2017 2016 Olefins and Polyolefins segment ...... 15% 14% 16% 17% Plastics, Elastomers and Intermediates segment ...... 32% 32% 34% 39% Midstream segment ...... 14% 15% 17% 16% Unallocated(1) ...... 39% 39% 33% 28% Total ...... 100% 100% 100% 100% ______Note: (1) Includes logistics, sales and marketing, administration functions, project offices and service centres.

The Group considers its relationships with its employees as satisfactory. Approximately 58% of the Group's employees are members of the "NefteGasStroyProfsoyuz" labour union. The Group considers its relationships with the labour unions as constructive and positive.

Human Capital Management

The Group uses a company-wide unified remuneration system. Compensation of the Group's personnel includes a base salary and performance bonuses that depend on the employee's grade, their performance against KPI targets, and the Group's overall results in the short term. In the long term, the Group's management and shareholders interests are aligned to help with the remuneration structures.

Base salary is revised annually, taking into account the economic situation, the labour market and the employee's individual performance. In 2018, the average salary at the Group increased by 21% year-on-year to RUB 96,652 per month. All changes in the remuneration and incentive framework promote the Group's corporate culture and objectives for motivating, attracting and retaining talent and enhancing its performance and competitive position.

The Group maintains several social and employee benefits programmes for its employees. The Group's employees receive medical benefits beyond the obligatory medical insurance programme. Additionally, the Group provides its employees with a wide range of opportunities for maintaining a healthy lifestyle. The Group organises pre-employment medical examinations and routine check- ups for its employees exposed to hazardous working conditions. The Group places a high priority on programmes that promote preventive healthcare, physical exercise and healthy lifestyles. SIBUR-South, the Group's corporate resort in Anapa on the Black Sea coast, offers medical treatment and summer holidays to Group employees and their families. From 2016, the Group has been providing vouchers covering all expenses at the SIBUR-South resort for employees and their families.

Under Russian laws and regulations, the Group makes mandatory contributions to a number of employee benefit programmes, including state pension insurance and obligatory medical insurance.

Personnel Training and Career Development

In addition to monetary compensation, the Group also has an ongoing training system for its employees. The Group's employees have access to professional education through the Corporate University (the "University"), a structural division of the Group which provides a number of training programmes in the areas of management, leadership, sales marketing, production efficiency, safety, corporate services and investment projects. For example, the University - 219-

provides professional competence development programmes through the participation of international experts with the functional faculties. In addition, the University has a technical training centre in Tobolsk to improve the engineering and technological expertise of its employees with the involvement of licensors and vendors. The Group also provides special corporate and individual programmes, which are developed for employees who are identified as having high leadership potential, through partnership programmes with leading business schools, corporate universities and international consulting companies. These programmes include education, training, job rotation and participation in various projects. Selected employees are also assigned a mentor from the Group's management.

The Group also works to attract talented young people to starting positions in the Group. The Group has a two-year programme for junior staff induction and developments and an internship programme for graduating students.

Production System of SIBUR (PSS)

The PSS is a tool aimed at creating a culture of continuous improvement. The overarching principle of PSS is to align the employees with the Group's strategic goals. PSS drives a culture of performance excellence, safety and sharing of best practices and ideas to enable sustainable efficiency gains.

PSS has been implemented with the Group's employees at all of its production sites. It rewards idea generation as a way to solve problems and achieve targets. PSS gives every team and employee tools to identify issues and develop solutions, and share lessons learned, innovations and best practices across the Group. For example, in 2018 more than 38,000 "small steps improvements" ideas were submitted for improving safety and health conditions, operational efficiency and loss minimisation, 26,000 of which were considered and applied.

To sustain performance and promote continuous improvement, the Group created a PSS development screening programme. This system allows the Group to diagnose the current implementation and performance of the PSS in each division, and set targets and plans for the year. The main focus of the programme is self-assessment carried out by a division, in order to independently determine the current level of development, to identify priority areas of focus and to formulate activities to raise PSS implementation and performance at the divisional level. The PSS development screening programme allows the Group to compare its divisions with each other so as to benchmark opportunities for improvement and monitor progress towards goals.

The Group is implementing approaches to optimise business management and decision-making processes, increase productivity, delegate responsibility to appropriate levels, and use the Group's IT systems and technologies to their full potential, in order to teach the Group's organisation to make smarter and faster decisions.

LITIGATION

From time to time, the Group is involved in litigation in the ordinary course of its business activities. Management believes there are no current legal proceedings or other outstanding claims that could have a material adverse effect on the Group's operational results or financial position.

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REGULATION OF GAS PROCESSING AND PETROCHEMICALS BUSINESS IN RUSSIA

Set forth below is a summary of material information concerning regulation of the gas processing and petrochemicals industry in Russia and the Group's business. This description does not purport to be a complete description of all laws and regulations applicable to the Group's business and should not be read as such.

Russia has not enacted any specific legislation governing the operation of the gas processing and petrochemicals industry. The Group's activities in the Russian Federation are regulated by general civil legislation and administrative and special regulation relating to particular aspects of its operations such as quality standards, industrial safety rules, environmental, employment, certain transportation requirements and other matters.

Regulatory Authorities

Russia has a tiered structure of federal authorities that divides responsibility between various governmental bodies. The Russian Government and the federal ministries issue regulations that interpret the legislation in their respective area and establish a corresponding regulatory regime. The federal services and federal agencies monitor compliance with applicable law and regulations promulgated by the federal ministries.

At the federal level, core general regulatory oversight of the Group's business is divided between the following Russian ministries:

• the Ministry of Industry and Trade, which is responsible for development of governmental policy in the industry and trade sectors and the creation of both general and industry- specific standards;

• the Ministry of Economic Development, which is responsible for development of foreign economic activity (except for foreign trade) and for analysis and strategic plans for social and economic development;

• the Ministry of Civil Defence, Emergencies and Disaster Relief, which is responsible for developing and implementing governmental policy in the fields of civil defence, prevention and resolution of emergency situations and fire safety;

• the Ministry of Energy, which is responsible for developing and implementing governmental policy for enterprises of fuel and energy complex, including gas processing and petrochemicals industry;

• the Ministry of Natural Resources, which is responsible for development of governmental policy and regulation in the sphere of natural resources. It coordinates the activities of the regulatory authorities in the environmental protection area and passes regulations setting environmental requirements for exploration and development of natural resources;

• the Ministry of Construction, Housing and Utilities of the Russian Federation, which is responsible for developing and implementing state policy and regulation in the sphere of construction (including the use of materials, products and structures in construction);

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• the Ministry of Labour and Social Protection of the Russian Federation, which is responsible for implementing government policy in the sphere of labour and living standards, employment, labour migration, labour conditions and protection; and

• the Ministry of Finance of the Russian Federation, which is responsible for drafting and implementing government policy and legal regulation in the sphere of budget, tax, foreign exchange and customs.

The principal federal services and federal agencies that regulate the Group's business include:

• the Federal Service for Environmental, Technological and Nuclear Supervision, also referred to herein as Rostekhnadzor, which oversees compliance with certain mandatory industrial safety rules and issues licences and authorisations for certain industrial activities, registers hazardous facilities and imposes limits on, and establishes rules governing, nuclear waste disposal;

• the Federal Service for Labour and Employment, which monitors and supervises companies' compliance with labour legislation;

• the Federal Agency for Technical Regulation and Metrology, which determines and oversees compliance with obligatory state standards and technical regulations;

• the Federal Agency on Water Resources, which monitors compliance with obligatory state requirements in the sphere of water resources protection;

• the Federal Service for Supervision of Natural Resource Usage (Rosprirodnadzor), which is responsible for federal state environmental supervision, issues air pollution and water discharge permits and sets limits on waste production (except for nuclear waste) and standards for its disposal;

• the Federal Tax Service of the Russian Federation, which is responsible for monitoring of compliance with the legislation on taxes and duties, foreign currency within the jurisdiction of tax agencies;

• the Federal Customs Service of the Russian Federation, which is responsible for exercising control and supervision over customs clearance in accordance with Russian legislation; and

• the Federal Antimonopoly Service, also referred to herein as the FAS, which supervises compliance with antimonopoly legislation and the state policy of promoting and development of the commodity markets and competition by seeking to prevent and terminate monopolistic activities, unfair competition and other violations of antimonopoly legislation. This service also oversees acquisitions of controlling stakes in companies and activities of companies holding dominant market positions.

In addition, there are a number of government organisations which, together with their relevant sub-divisions, have authority over various general issues relevant to the Russian gas processing and petrochemicals industry or are otherwise involved in regulation of other areas of the Group's business. Generally, regional and local authorities with jurisdiction over a specific region have substantial power and influence, including certain taxation powers.

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Gas Industry Regulation

The principal legislative act regulating the gas industry in Russia is Federal Law No. 69-FZ "On Gas Supply in the Russian Federation", dated 31 March 1999, as amended (the "Gas Supply Law"). The Gas Supply Law establishes a regulatory framework for natural gas supply in Russia. Under the Gas Supply Law, Russian federal authorities have jurisdiction over natural gas supplies, including the development and implementation of the governmental policy on natural gas supply, the regulation of strategic natural gas reserves, control over the industrial and environmental safety of the industrial sites of the natural gas supply systems, and standardisation and certification in the gas industry. Under the Gas Supply Law, the Government: (i) sets the procedure for formation and approval of the projected natural gas production levels and the sales balance in Russia; (ii) approves, among other things, the gas supply rules, the rules for use of gas and the rules for gas supply services; (iii) determines the principles of natural gas prices and transportation tariffs; (iv) approves the procedure for determining indicators of reliability and quality of services for the transportation of gas through gas distribution networks; and (v) approves templates of documents related to access (utility connection) to gas distribution networks; and (vi) approves the requirements for persons eligible to provide services related to maintenance and repair of gas objects; (vii) approves the methodology for calculating gasification indicators or determines the federal executive body authorised to approve this methodology; (viii) approves the methodology for calculating the damage incurred as a result of theft committed from gas pipelines or determines the federal executive body authorised to approve this methodology.

Gas Prices and Tariffs

Natural gas prices and transportation tariffs in Russia are regulated pursuant to Federal Law No. 147-FZ "On Natural Monopolies", dated 17 August 1995, as amended (the "Natural Monopolies Law"), and the Gas Supply Law, as well as pursuant to certain resolutions of the Russian Government. The Natural Monopoly Law defines "natural monopoly" as a condition of the commodities market in which the demand for products is satisfied more effectively in the absence of competition due to technological characteristics of the manufacturing process (as a result of significant decrease in the costs of production per item upon increase of production volumes) and in which another product cannot readily be substituted for the monopoly product, which makes demand for the monopoly product less responsive to price movements than demand for other products. Resolution No. 1021, sets forth the main provisions for regulating the wholesale price of natural gas and transportation tariffs. Resolution No. 1021 sets a transition period from 2011 to 2017, during which measures should be taken in order to create conditions for practical implementation of market principles for pricing of gas produced by Gazprom and its affiliates. Given that such transition period has already expired, it is envisaged that in the future regulated rates of tariff for gas produced by Gazprom and its affiliates could be replaced with market pricing.

FAS regulates (i) the wholesale price of gas extracted by Gazprom, its affiliates (including any entity in which it has 20% or more equity ownership) and some other companies as set out in Resolution No. 1021, but not the wholesale price of natural gas produced by independent gas suppliers such as the Group, and (ii) the tariff charged to independent gas suppliers such as the Group to transport their gas through the UGSS. The principles of pricing include the recovery of economically reasonable expenses by suppliers and transportation companies, maintenance of reasonable operating margins and satisfaction of the demand for gas. While the Group's sale prices are not regulated, they are customarily closely linked to the FAS-regulated natural gas prices and also indexed in line with the regulated price changes.

Prices for APG, one of the Group's key feedstocks, are not regulated by the Russian Government.

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Railway Transportation Tariffs

The Group uses rail for transportation of its refined products, intermediates and feedstock. The Group's rail transportation costs comprise the Railway Tariff charged for access to Russia's main railway and usage of locomotives. The Railway Tariff is charged by Russian Railways. According to the Natural Monopolies Law, the core services provided by Russian Railways are classified as belonging to the natural monopoly sector, and the prices charged by Russian Railways for such services, including freight railway transportation, are regulated by the FAS. The Railway Tariff is specific to types of products, types of carriers and their tonnage, transportation routes and volume of a delivery. FAS reviews the Railway Tariff from time to time. See "Risk Factors — Risks Relating to the Group's Business — Disruption in railway transportation or increases in costs related to railway transportation could adversely impact the Group's results of operations".

APG Flaring

Russian oil producers flare large volumes of APG. According to CDU TEK, the total volume of flared APG in Russia in 2018 was 15.7 billion cubic metres or 15% of total produced volumes. Over the past few years, the Russian Government has undertaken a number of measures to reduce APG flaring, including through amendments to the relevant regulatory and legal framework.

On 8 November 2012, the Russian Government adopted Resolution No. 1148 "On Peculiarities of Calculation of Charges for Adverse Environmental Impact Caused by the Emission of Pollutants Resulting from Flaring or Dispersion of Associated Petroleum Gas into Free Air", which became effective as of 1 January 2013 and was amended on 17 December 2016 and on 28 December 2017 ("Resolution No. 1148"). Resolution No. 1148 imposes substantially higher payments for flaring of APG in volumes exceeding permitted thresholds. According to Resolution No. 1148, from 1 January 2013, the threshold for flaring was capped at 5% of the total APG produced subject to several exceptions set out in the Resolution No. 1148. Resolution No. 1148 imposes increased penalties for flaring APG in excess of this 5% threshold: a penalty of 25 times the standard emission charge. The standard emission charges are defined in the Resolution of the Russian Government No. 913, dated 13 September 2016, as amended, and depend on the type of pollutant. These new penalties are significantly higher than those applied to excessive APG flaring up to 2012 pursuant to the preceding resolution.

Other measures the Russian Government has taken to encourage oil companies to reduce APG flaring include the adoption of Resolution No. 118 "On Preparation, Agreement and Approval of Engineering Designs for Development of Mineral Deposits and Other Design Documents for the Performance of Works Connected with the Use of Subsoil Plots", dated 3 March 2010, as amended, which provides that project design documentation prepared in connection with the construction of new facilities should set out measures for utilisation of APG.

In addition, in March 2010, Federal Law No. 35-FZ "On Electrical Energy Industry", dated 26 March 2003, as amended, was amended to facilitate priority access to the Unified National Electricity Grid for electricity production facilities powered by APG and its derivatives.

Further, on 3 December 2012, the Russian President signed amendments to the Gas Supply Law. These amendments, which became effective from 1 January 2013, provide that suppliers of dry gas derived from APG processing should have priority access to the UGSS.

Export Duties

LPG and naphtha, products that the Group exports, are subject to export duties.

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In accordance with Resolution of the Russian Government No. 276, dated 29 March 2013, as amended, LPG (excluding butane and isobutane) export duty is calculated based on a separate progressive scale and is linked to the average monthly LPG price at the border of Belarus and Poland (DAF Brest terms). The table below illustrates the calculation of the export duty depending on the respective price bands of international LPG prices.

LPG price (DAF Brest) Export duty (excluding butane and isobutane) Below USD 490 per tonne Export duty is not levied USD 490 per tonne to USD 640 per tonne 50% of the difference between average LPG price and USD 490 per tonne USD 640 per tonne to USD 740 per tonne USD 75 per tonne plus 60% of the difference between average LPG price and USD 640 per tonne Above USD 740 per tonne USD 135 per tonne plus 70% of the difference between average LPG price and USD 740 per tonne Effective 1 January 2015, the Russian Government imposed an export duty on butane and isobutane, which is calculated as the percentage of the export duty on LPG grades excluding butane and isobutane and was set at 10% of that level for 2015, at 20% for 2016 and at 30% for 2017 with successive annual increases up to 90% effective 1 January 2022.

The export duty on naphtha is calculated as a percentage of the export duties on crude oil (Urals). The export duties for crude oil and oil products are calculated by the Ministry of Economic Development on a monthly basis in advance of each calendar month and are effective from the first calendar day of the respective month. The rate for crude oil is based on the average Urals crude oil price for the period from the 15th calendar day in the month to the 14th calendar day of the following month. In January 2015, the Russian Government set the export duty on naphtha at 85% of the crude oil export duty. For 2016, this rate was set at 71%. Since 1 January 2017, the export duty on naphtha is set at 55% of the crude oil export duty rate.

Export sales to member states of the Customs Union (Republic of Belarus, Republic of Kazakhstan, Republic of Armenia and Kyrgyz Republic) are not subject to export duties.

Licensing

The Group is required to obtain a number of licences, authorisations and permits from Russian governmental authorities for its operations. Federal Law No. 99-FZ "On Licensing of Certain Types of Activities", dated 4 May 2011, as amended (the "Licensing Law"), as well as other laws and regulations, set forth the activities subject to licensing and established procedures for issuing licences. Such activities include, for example:

• exploitation of explosive and flammable hazardous and chemically hazardous industrial objects of the I, II and III class of hazard;

• collection, transportation, processing, utilisation, deactivation and placement of hazardous waste of the I-IV class of hazard; and

• assembly, repair and maintenance of fire safety systems.

The licences are usually issued for an indefinite term. The Group is required under licensing regulations and the terms of its licences and permits to comply with numerous industrial standards, employ qualified personnel, maintain certain equipment and a system of quality controls, monitor operations, maintain and make appropriate filing and, upon request, submit specified information to the licensing authorities that control and inspect its activity. Failure to comply with these

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requirements may result in suspension of the licence by a licensing authority or revocation of the licence by a court order.

Environmental Matters

The Group is subject to laws, regulations and other legal requirements relating to protection of the environment, including those governing the discharge of substances into the air and water, and the management and disposal of hazardous substances and waste. Issues of environmental protection in Russia are regulated primarily by Federal Law No.7-FZ "On Environmental Protection", dated 10 January 2002, as amended (the "Environmental Protection Law"), as well as by a number of other federal and local legal acts. Rosprirodnadzor, Rostekhnadzor and certain other federal authorities (along with their regional branches) are involved in environmental control, implementation and enforcement of relevant laws and regulations. The Russian Government and the Ministry of Natural Resources are responsible for coordinating the activities of the regulatory authorities in this area. Such regulatory authorities, along with other state authorities, individuals and public and non-governmental organisations, also 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.

Pay-to-pollute

The Russian Government and the Ministry of Natural Resources establish guidelines for setting limits for different types of permissible impact on the environment, including the emission, disposal of substances and waste disposal, whereas Rosprirodnadzor (or, in particular circumstances, Rostekhnadzor or another governmental authority) sets individual limits on permissible impact on the environment. A company may obtain approval for exceeding these limits if adherence to such limits is not feasible, provided that the company has developed a plan aimed at the reduction of emissions or disposal and cleared it with the appropriate government authority. Fees are assessed on a sliding scale on emissions and discharge of polluting substances in excess of these limits: the lower fees are imposed for pollution within the individually approved limits, and the higher fees are imposed for pollution exceeding such limits. Payments of such fees do not relieve a company of its responsibility to take environmental protection measures.

Environmental liability

If the operations of a company violate environmental requirements or cause harm to the environment or any individual or legal entity, 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 or its employees that fail to comply with the requirements of applicable environmental laws and regulations may be subject to administrative and/or civil liability, while individuals may also be subject to criminal liability. Courts may also impose clean-up obligations on violators in lieu of, or in addition to, imposing fines.

EU REACH

REACH Regulation is the Regulation for Registration, Evaluation, Authorisation and Restriction of Chemicals (Regulation (EC) No. 1907/2006 of the EU Parliament and of the Council of December 18, 2006, as last amended by EU Commission Regulation (EU) No 2018/2005 of December 17, 2018). REACH Regulation entered into force in stages, firstly on June 1, 2007, secondly on June 1, 2008, thirdly on August 1, 2008 and lastly on June 1, 2009, to streamline and improve the former legislative framework on chemicals of the EU. Its main objectives include improving the protection of human health and the environment from the risks that can be posed by chemicals and ensuring the free circulation of substances on the internal market of the EU. - 226-

REACH Regulation places greater responsibility on the industry to manage the risks that chemicals may pose to health and the environment. Other legislation regulating chemicals (for example, on cosmetics and detergents) or related legislation (e.g., on health and safety of workers handling chemicals, product safety, construction products) not replaced by REACH Regulation continue to apply.

REACH Regulation applies to all chemical substances; however, under certain conditions, substances are exempted from all or a part of the obligations under REACH Regulation. In principle, all manufacturers and importers of chemicals must identify and manage risks linked to the substances they manufacture and market. For substances produced or imported in quantities of one ton or more per year per company, manufacturers and importers need to demonstrate that they have appropriately done so by means of a registration dossier, which shall be submitted to the European Chemicals Agency ("ECHA"). ECHA may then check that the dossier is compliant with REACH Regulation and will evaluate testing proposals to ensure that the assessment of the chemical substances will not result in unnecessary testing, especially on animals. Where appropriate, authorities may also select substances for a broader substance evaluation to further investigate substances of concern.

REACH Regulation also provides for an authorization system aiming to ensure that substances of very high concern are adequately controlled and progressively substituted by safer substances or technologies or only used where society benefits overall from using the substance. These substances are prioritized and gradually included in Annex XIV to REACH Regulation. Once they are included, the industry has to submit applications to ECHA on authorization for continued use of these substances which are otherwise prohibited. In addition, EU authorities can impose restrictions on the manufacture, use or placing on the market of substances causing an unacceptable risk to human health or the environment.

Manufacturers and importers must provide their downstream users with the risk information they need to be able to use the substance safely. This is done via the classification and labeling system and Safety Data Sheets (SDS), where needed.

Health and Safety

Due to the nature of the Group's business, much of its activity is conducted at industrial sites by large numbers of workers, and industrial safety issues are of significant importance to the operation of these sites. The principal law regulating industrial safety is Federal Law No. 116-FZ "On Industrial Safety of Hazardous Industrial Facilities", dated 21 July 1997, as amended (the "Safety Law"). The Safety Law applies, in particular, to industrial facilities exploiting certain kinds of hazardous industrial objects, including sites where certain lifting machines and high-pressure devices are used. The Safety Law also contains an exhaustive list of criteria for hazardous substances and permitted concentration of hazardous substances, and extends to facilities and sites where these substances are used.

Any construction, reconstruction, liquidation or other activities in relation to regulated industrial sites are 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. Companies that operate such industrial facilities and sites have a wide range of obligations under the Safety Law. In particular, they must limit access to such sites to qualified specialists, maintain industrial safety controls and carry insurance for third party liability for injuries caused in the course of operating industrial sites. The Safety Law also requires these companies to enter into contracts with professional wrecking companies or create their own wrecking services in certain cases, conduct personnel training programmes, create systems to cope with and inform Rostekhnadzor of accidents and maintain these systems in good working order. - 227-

In certain cases, companies operating industrial sites must also prepare declarations of industrial safety, which summarise the risks associated with operating a particular industrial site and measures the company has taken and will take to mitigate such risks and use the site in accordance with applicable industrial safety requirements. Such declaration must be adopted by the general director of the company, who is personally responsible for the completeness and accuracy of the data contained therein. The industrial safety declaration, as well as a state industrial safety compliance review, are required for the issuance of a licence permitting the operation of a hazardous industrial facility. The Safety Law also provides that the use of technical equipment at hazardous industrial facilities is generally subject to the state industrial safety compliance review. 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. The company operating the hazardous industrial facility where the accident took place bears all costs of an investigation. The officials of Rostekhnadzor have a right to access industrial sites and may inspect documents to ensure a company's compliance with safety rules. Rostekhnadzor may suspend operations or impose administrative 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 obligated to compensate the individual for lost earnings, as well as health-related damages.

Investments in Russian Strategic Enterprises

Russian Federal Law No. 57-FZ "On Procedure for Implementing Foreign Investment in Commercial Enterprises Having Strategic Importance for Securing the National Defense and Security of the State", dated 29 April 2008, as amended (the "Strategic Enterprises Law"), sets forth certain restrictions and special procedures relating to foreign investments in companies that are deemed to be strategic (the "Strategic Enterprises") by imposing restrictions on the acquisition of control over Strategic Enterprises and by establishing a procedure for approving the acquisition of such control. Under the Strategic Enterprises Law, foreign investors acquiring direct or indirect control over a Strategic Enterprise are required to obtain the prior approval or, in certain cases, post-transactional approval, of the Foreign Investments Supervision Commission of the Russian Government. Such approval is subject to a determination by the Russian Federal Security Service that the acquisition of control does not threaten the national defence and security of the Russian state. Additionally, the approval may be subject to the fulfilment of certain conditions by the foreign investor, including, among others, achieving a Strategic Enterprise's business plan and securing the employment of a certain number of personnel. The approval process usually takes between three and nine months.

Amendments to the Strategic Enterprises Law provide that the Strategic Enterprises Law shall not apply to transactions with respect to Strategic Enterprises where the acquirer is a legal entity under control of the Russian Federation or a Russian citizen who is a tax resident of the Russian Federation (except for individuals with dual citizenship).

Strategic Enterprises include companies that conduct certain types of activities listed in the Strategic Enterprises Law. As several of the Group's subsidiaries are recognised as natural monopolies in the spheres of transportation through gas pipelines, water supply services, sanitation with the use of centralised systems and communal infrastructure systems, they can be considered a Strategic Enterprise.

If the acquisition of control over a Strategic Enterprise is carried out in the absence of the requisite approval, the transaction is void under the Russian legislation and the foreign investor and/or its group of companies may be deprived of voting rights that correspond to the stake acquired in the Strategic Enterprise. - 228-

Anti-Monopoly Legislation

The anti-monopoly legislation of the Russian Federation is based on Federal Law No. 135-FZ "On the Protection of Competition", dated 26 July 2006, as amended (the "Competition Law"), and other federal laws and regulations governing anti-monopoly issues. Anti-monopoly restrictions include prohibitions on the conclusion of anti-competitive agreements, the exercise of anti- competitive coordinated actions, acts resulting in unfair competition, and the abuse of a dominant position. Russian legislation grants the FAS the powers necessary for the performance of its functions and dealing with violations of anti-monopoly legislation.

An entity or a group of entities is deemed to have a dominant position in a particular commodity market if: (a) the entity (or the group of entities) has a market share in a particular commodity market in excess of 50%, unless it is specifically established by the FAS that the entity (or the group of entities) does not have a dominant position; or (b) the entity has a market share in a particular commodity market which is less than 50% and the dominant position of the entity (or the group of entities) is specifically established by the FAS based on the stability or near stability of such entity's (or such group of entities') share in a particular commodity market, and certain characteristics of the relevant commodity market (such as the accessibility of the commodity market to new competitors). Following the amendments introduced in 2015 by Federal Law No. 275-FZ, an entity cannot be deemed to have a dominant position if its market share is less than 35% except for cases of collective dominance, financial organisations or a limited number of situations specifically prescribed by other federal laws.

Several entities are deemed to have collective dominance if each of them meets all of the following criteria: (i) the aggregate market share of not more than three entities exceeds 50%, or the aggregate market share of not more than five entities exceeds 70% (provided that the market share of each such entity exceeds market shares of other entities on the same commodity market) and the market share of each entity is not less than 8%; (ii) during at least one year (or if the relevant commodity market has existed for less than one year, such shorter period) the relative sizes of entities' shares are stable or subject to insignificant changes, and access of new competitors to the relevant market is impeded; and (iii) the goods purchased or sold cannot be replaced with other goods, the increase of commodity prices will not lead to respective decrease of demand and information about the prices, conditions of selling or purchasing in the relevant market is publicly available.

The Competition Law provides for mandatory pre-approval by the FAS of certain transactions on acquisition of voting shares of joint stock companies, participation interest in limited liability companies, acquisition of the core production assets (with certain exceptions) and/or intangible assets of an entity, obtaining (directly or indirectly) rights to determine the conditions of business activity of an entity or to exercise the powers of its executive body, mergers and consolidations of entities and formation of an entity if certain thresholds established by the Competition Law are met.

Intra-group transfers are subject to merger control. They may be exempt from the prior approval requirement and may be subject to post-transactional notification to the FAS under certain circumstances, including a requirement that a list of group members should be disclosed to the FAS not later than one month prior to closing in accordance with the Competition Law.

The Competition Law expressly provides for its extraterritorial application to transactions that are entered into outside of Russia but lead, or may lead, to the restriction of competition in Russia.

Under the Competition Law, if an acquirer has acted in violation of the merger control rules and, for example, acquired shares without obtaining the prior approval of the FAS, the transaction may - 229-

be invalidated by a court order initiated by the FAS, provided that such transaction has led or may lead to the restriction of competition, for example, by means of strengthening a dominant position in the relevant market.

Procurement of Goods and Services

Federal Law No. 223-FZ "On Procurement of Goods, Works and Services by Certain Types of Legal Entities", 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 for certain categories of legal entities, including natural monopolies and their direct and indirect subsidiaries. In accordance with the Procurement Law, these entities are required to develop procurement regulations specifying rules and procedures for the purchase of goods, services and works and publish them on the designated website of the Unified Information System in the Sphere of Procurement ("UES"). Provisions of the Procurement Law apply to companies recognised as natural monopolies, except for cases where the revenue of such company from activities falling within the scope of regulated activities of natural monopolies does not exceed 10% of its revenue derived from all types of transactions listed by the company on the UES website. Since 2007, JSC SiburTyumenGaz is recognised as a natural monopoly in the sphere of pipeline transportation of gas.

Employment and Labour Regulation

Labour matters in Russia are primarily governed by the Labour Code. In addition to this core legislative act, relationships between employers and employees are regulated by various federal laws. For certain territories with harsh climatic conditions, Russian legislation establishes additional regulations to protect the interest of employees. Under Law of the Russian Federation No. 4520-1 "On the State Guarantees and Compensation for Persons Working and Residing in the Far North Regions and Areas of Equal Status", dated 19 February 1993, such employees are entitled to certain additional benefits, including higher salaries and bonuses and additional vacation days.

Certain Matters of International Trade Regulation

The United States has adopted laws and regulations that enable it to impose trade sanctions on certain entities and persons. These laws and regulations are primarily administered by the U.S. Treasury Department's Office of Foreign Assets Control (OFAC).

The Group does not believe that it is subject to trade sanctions laws and regulations, including those administered by the OFAC. In the past, the Group had dealings with entities named on the SDN List and entities named on the SSI List, each maintained by the OFAC, as part of its ordinary course of business and for civil purposes and may in the future have dealings with these or other entities named on the SDN List, the SSI List or in sanctioned countries and regions.

Two of the minor ultimate beneficiaries of the Guarantor, Mr. Gennady Timchenko and Mr. Kirill Shamalov, are included in the SDN List. Due to the minority of their effective shareholding, they do not have sufficient means of controlling the Group, and the Group therefore must not be viewed as subject to relevant sanctions administered by the OFAC.

The Company maintains and continues to improve its internal procedures to ensure that proceeds of the Offering will not be used to benefit such persons or jurisdictions.

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MANAGEMENT

Governing Bodies of the Company

The corporate governance structure of the Company consists of the General Meeting of Shareholders, the Board of Directors, the Management Board and the Sole Executive Body (functions of the Company's Sole Executive Body were transferred to the Management Company). The Company's Management Board and the Sole Executive Body are responsible for the Company's day-to-day operations and report to the Board of Directors and the General Meeting of Shareholders. The Management Company in turn has two Sole Executive Bodies: Mr. Dmitry Konov, who occupies the position of Chairman of the Management Board of the Company, is responsible for strategic activities and management of the Company on behalf of the Management Company; Mr. Mikhail Karisalov, who occupies the position of Chairman of the Management Board of the Management Company, is responsible for operational activities and management of the Group's major projects such as construction of ZapSibNeftekhim.

Board of Directors

The following table sets forth certain information with respect to the members of the Board of Directors (also referred to as Directors) as of the date of this Prospectus:

Year of Year Name Birth Position appointed Leonid Mikhelson ...... 1955 Director, Chairman of the Board of Directors 2011 Wang Dan ...... 1969 Director, Executive Vice President of the Silk Road Fund 2017 Co., Ltd., Member of the Strategy and Investments Committee Alexander Dyukov ...... 1967 Director, Deputy Chairman of the Board of Directors, 2005 Chairman of the Strategy and Investments Committee, Member of the Human Resources and Remuneration Committee Dmitry Konov ...... 1970 Director, Chairman of the Company's Management Board 2007 Sergey Vasnetsov* ...... 1963 Independent Director, Member of the Audit Committee 2018 and the Strategy and Investments Committee Andrei Vernikov* ...... 1960 Independent Director, Member of the Audit Committee 2018 and the Human Resources and Remuneration Committee Vladimir Razumov ...... 1944 Director, Member of the Strategy and Investments 2013 Committee Kirill Shamalov...... 1982 Director, President and General Director of LLC Ladoga 2014 Management, Member of the Strategy and Investments Committee Alexey Komissarov* ...... 1969 Independent Director, Member of the Audit Committee 2018 and Chairman of the Human Resources and Remuneration Committee Gennady Timchenko ...... 1952 Director, Member of the Strategy and Investments 2012 Committee Peter Lloyd O'Brien* ...... 1969 Independent Director, Chairman of the Audit Committee 2018 and member of the Human Resources and Remuneration Committee Li Cheng Feng ...... 1963 Director, Member of the Strategy and Investments 2018 Committee ______* Independent director (in accordance with director independence criteria established by Russian law).

The registered business address of each of the Company's Directors is: 16/1 Krzhizhanovskogo St., Moscow, GSP-7, 117218, Russian Federation.

Leonid Mikhelson has served as Director and Chairman of the Board of Directors since 2011. Mr. Mikhelson began his career as a foreman of a construction and assembly company in the Tyumen region, where he worked on the construction of the first section of the Urengoi-Chelyabinsk gas pipeline. Mr. Mikhelson served as Chief Engineer of Ryazantruboprovodstroy, General Director - 231-

of Kuibishevtruboprovodstroy, Managing Director of SNP NOVA and General Director of Novafininvest, and was a member and Chairman of the Board of Directors of JSC Stroytransgaz and JSC Yamal LNG, a member of the Board of Directors of LLC Art Finance and also a member of the Supervisory Board of PJSC Russian Regional Development Bank. He currently serves as Chairman of the management board of NOVATEK. Mr. Mikhelson graduated from the Samara Institute of Civil Engineering in 1977 with a degree in Industrial Civil Engineering. Mr. Mikhelson has been awarded the Order of the Badge of Honour of the Russian Federation, the Order of Merit for the Fatherland II degree and bears the honourable title of "Honoured man of the gas industry".

Wang Dan has been Director of the Company since 2017. Ms. Wang Dan is Executive Vice President of Silk Road Fund Co., Ltd. Before joining SRF, Ms. Wang worked at the International Department and the Monetary Policy Department II of the People's Bank of China (PBOC), and her last position at PBOC was Deputy Director-General of the Monetary Policy Department II. She also served as an adviser to the Executive Director for China at the International Monetary Fund. Ms. Wang holds a Master's degree in International Finance from the Graduate School of the People's Bank of China.

Alexander Dyukov has been Deputy Chairman of the Board of Directors since 2011. Mr. Dyukov is Chairman of the Strategy and Investments Committee and a member of the Human Resources and Remuneration Committee. From May to December 2015, Mr. Dyukov was a member of the Audit Committee. Mr. Dyukov served as CEO of the Company from February 2003 to November 2006. Since 2005, Mr. Dyukov has been a member of the Board of Directors. From 2006 to 2011, Mr. Dyukov served as Chairman of the Board of Directors. Mr. Dyukov has served as CEO of PJSC Gazprom Neft since 2006. Since 2008, Mr. Dyukov has acted as Chairman of the Management Board and a member of the Board of Directors of PJSC Gazprom Neft. Mr. Dyukov has acted as President (2008-2017) and Chairman of the Board of Directors of JSC Football Club Zenit from 2006 to 2019. Since 2019, Mr. Dyukov is a President of All-Russian public organisation "Russian football Union" and Chairman of the Board of Directors of LLC Gazprom Neft. Mr. Dyukov is a member of the Board of Directors of LLC National Oil Consortium, LLC Hockey Club SKA and LLC "Hockeyni Gorod". Until 2019, he was the Chairman of the Board of Directors of LLC "BC" Zenit". Since 2013, Mr. Dyukov has acted as a member of the Managing Board and Chairman of the Committee on industrial safety of the All-Russian public organisation "Russian Union of Industrialists and Entrepreneurs". From 2012 to 2013, Mr. Dyukov was a member of the Board of Directors of LLC Gazprom Gazomotornoye Toplivo. From 2012 to 2016, Mr. Dyukov was a member of the Board of Directors of LLC LIGA-TV. From 1996 to 1998, Mr. Dyukov served as Financial Director and General Director of Joint Venture JSC Petersburg Oil Terminal. In 1998, Mr. Dyukov was appointed as Director of Economics, and in 1999 served as Acting General Director of St. Petersburg Sea Port. In 2000, Mr. Dyukov returned to the Petersburg Oil Terminal as Chairman of the Board of Directors. Since 2007, Mr. Dyukov has been a member of the Board of Directors of JSC "Mnogofunktsionalni kompleks "Lakhta Centre", and since 2009 he has been Chairman of the Board. From 2007 to 2014 Mr. Dyukov served as a member of the Board of Directors of SLAVNEFT, and since 2013 he has been Chairman of the Board of Directors of SLAVNEFT. Mr. Dyukov graduated from Leningrad Shipbuilding Institute in 1991 with a degree in Engineering. Mr. Dyukov received an MBA from the International Management Institute of St. Petersburg in 2001.

Dmitry Konov has been Director of the Company since 2007. Mr. Konov joined the Group in February 2004. From February 2004 to November 2006, Mr. Konov held various positions at the Group, including Advisor to the President, Vice President for Corporate Policy and Strategy, Senior Vice President for Corporate Policy and Strategy, and Head of the Plastics and Organic Synthesis Business Unit. Since 2006, Mr. Konov has acted as CEO of the Management Company. Since June 2007, Mr. Konov has served as Chairman of the Company's Management Board, and from November 2009 to February 2018 he served as Chairman of the Management Board of the - 232-

Management Company. Mr. Konov was Chairman of the Board of Directors of RusVinyl from 2007 to 2015 and a member of the Board of Directors of LLC Tobolsk-Polymer from 2010 to 2013. From 2008 to 2015, Mr. Konov was Chairman of the Board of Directors of LLC SNHK. Mr. Konov was a member of the Board of Directors of Bank GPB (JSC) from 2010 to 2011, and OJSC Gazprom Neftekhim Salavat from 2010 to October 2012. Prior to joining the Group, Mr. Konov worked for AKB Trust and Investment Bank from 2001 to January 2004, where he held the positions of Vice President – Head of the Investment Banking Department and Managing Director of Corporate Finance Department. From 1998 to 2000, Mr. Konov worked in the Treasury Department of OJSC NK YUKOS. From 2014 to 2016, Mr. Konov served as a member of the Board of Directors of JSC Stroytransgaz, and since 2014 he has been a member of the Board of Directors of LLC STGM, JSC STNG. Since 2016, Mr. Konov has been a member of the Board of Directors of JSC "NIPIGAS" (from 2016 to 2018, he was the Chairman of the Board of Directors). Since 2017, Mr. Konov has been a member of the Board of Directors of PJSC "ALROSA". From 2005 to 2012, Mr. Konov was Chairman of the Board of Directors of LLC "SIBUR-Russkie shini". Mr. Konov graduated from Moscow State Institute of International Relations (MGIMO) in 1994 with a degree in International Economic Relations. Mr. Konov received an MBA degree at IMD in 2001.

Sergey Vasnetsov has been Director of the Company since 2018. Currently, Mr. Vasnetsov serves as a member of the Strategy and Investments Committee and Audit Committee of the Board of Directors and a member of the Board of Directors of Eurochem AG. Mr. Vasnetsov graduated from Novosibirsk State University with a Master's degree in Chemistry in 1985. In 1990, he graduated from Oxford University, majoring in study and research, and, in 1995, Mr. Vasnetsov obtained an MBA degree from Rutgers University. Mr. Vasnetsov served as Senior Vice President of Strategic Planning and Transactions and as Head of the Division of Special Plastics for the Automotive Industry to LyondellBasell.

Andrei Vernikov has been Director of the Company since 2018. Currently, Mr. Vernikov serves as a member of the Human Resources and Remuneration Committee and the Audit Committee of the Board of Directors. Since 2004, Mr. Vernikov has been a leading researcher at the Institute of Economics, Russian Academy of Sciences. From 2006 to 2016, he acted as Professor of the Department of Finance, HSE. From 2001 to 2004, he acted as Vice President Finance at Black Sea Trade and Development Bank. In 1998 – 2001, he was the Deputy Chairman of the Management Board at ABN AMRO Bank CJSC (Moscow). From 2007 to 2015, he was an independent director at MIEL. In 2007 – 2013, he was an independent directors at AK BARS Bank (OJSC) (Kazan). Mr. Vernikov graduated from the Moscow State Institute of International Relations of the Ministry of Foreign Affairs of the USSR with an Economics degree in international economic relations with knowledge of a foreign language in 1981. In 2006, Mr. Vernikov obtained a doctoral degree in Economics.

Vladimir Razumov has been Director of the Company since 2011. Currently, Mr. Razumov serves as a member of the Strategy and Investments Committee of the Board of Directors and Vice Chairman of the Company's Management Board. Mr. Razumov is a member of the Management Board of the Management Company and was a member of the Board of Directors of OAO "VNIPIneft" from 2012 to 2013. He was a member of the Board of Directors of JSC SIBUR- Trans from 2006 to 2012 and Chairman of the Board of Directors of LLC Tobolsk-Polymer from 2010 to 2016. From 1999 to 2002, Mr. Razumov served as Vice President in charge of Production of Synthetic Rubber and Tyres and Senior Vice President in charge of Petrochemical Production of OJSC AK Sibur. In 2003, Mr. Razumov rejoined OJSC AK Sibur and, until 2005, served as Advisor to the President, Vice President in charge of Production and Senior Vice President in charge of Production and Marketing. From 2005 to 2006, Mr. Razumov served as Senior Executive Vice President at OJSC SIBUR Holding. Mr. Razumov's experience includes serving as Director of OJSC SIBUR-Russian Tyres, OJSC SIBUR-Neftekhim, OJSC Plastic and JSC SIBUR-Trans. - 233-

From 1989 to 1992, Mr. Razumov served as the USSR Deputy Minister of the Oil Refining and Petrochemicals Industry. In 1988, Mr. Razumov was appointed as Head of the Main Procurement Department of the USSR Ministry of the Oil Refining and Petrochemicals Industry. From 1968 to 1983, Mr. Razumov worked at VoronezhSintezKauchuk as an engineer, section manager, mechanic, shop manager and Deputy Director for Procurement and Marketing. Mr. Razumov was appointed as Director of the Volga Synthetic Rubber Plant in 1983. Mr. Razumov graduated with honours from Voronezh Technological Institute in 1967 with a degree in Engineering. In 1980, Mr. Razumov graduated from Plekhanov Russian Academy of Economics with a degree in Procurement. From 1987 to 1989, Mr. Razumov studied at the Academy of the National Economy under the USSR Council of Ministers, specialising in Economics and Management of the National Economy.

Kirill Shamalov has been Director of the Company since 2014, following his acquisition of a 21.3% stake in the Company, which he subsequently sold down to 3.9% in 2017. Currently, Mr. Shamalov is a member of the Strategy and Investments Committee of the Board of Directors and Vice Chairman of the Company's Management Board. Since May 2018, Mr. Shamalov has been General Director of LLC "Eudora Investments". Since 2014, Mr. Shamalov has been a member of the Board of Directors of LLC "Russian Cement Company" and President of LLC "Ladoga Management" (since March 2018, the General Director). From 2008 to 2012, Mr. Shamalov served as Vice President for Business Administration of the Management Company. From 2008 to 2015, Mr. Shamalov was a member of the Company's Management Board and, from 2009 to 2015, a member of the Management Board of the Management Company. From 2012 to 2015, Mr. Shamalov served as Deputy Chairman of the Management Board of the Management Company. Previously, Mr. Shamalov was Chief Legal Counsel for foreign economic activity at PJSC Gazprom, Expert in the regional department of FGUP Rosoboronexport, Chief Lead Counsel in the legal department of Bank GPB (JSC) and Expert Consultant in the Economics and Finance Department for the Russian Government. Mr. Shamalov graduated from St. Petersburg State University with a degree in Law in 2004.

Alexey Komissarov has been Director of the Company since 2018. Currently, Mr. Komissarov serves as Chairman of the Human Resources and Remuneration Committee and Audit Committee of the Board of Directors. Since 2017, Mr. Komissarov has been Vice-Rector, Director of the Higher School of Public Administration, Ranepa, and independent Director and Chairman of the Human Resources, Remuneration and Corporate Governance Committee of FGK JSC. Since 2018, Mr. Komissarov has been General Director of ANO "Russia is a country of opportunities". From 2015 to 2017 Mr. Komissarov acted as Director, Industry Development Fund and independent Director, a member of the Strategy and Investment Committee, Chairman of the Budget and Reporting Committee of "GLONASS". From 2011 to 2015, Mr. Komissarov worked in the Moscow government as Advisor to the Mayor of Moscow (2014-2015); as well as Minister of the Government of Moscow and Head of the Department of Science, Industrial Policy and Entrepreneurship. Mr. Komissarov graduated from Moscow State Automobile and Road Technical University (MADI) with an Engineering degree in the maintenance and repair of vehicles in 1994. In 2003, Mr. Komissarov obtained an MBA degree from Kingston University. In 2010, Mr. Komissarov obtained a Chartered Director degree from IoD, UK.

Gennady Timchenko has been Director of the Company since 2012. Currently, Mr. Timchenko serves as a member of the Strategy and Investments Committee of the Board of Directors. Mr. Timchenko has been a member of NOVATEK's Board of Directors since 2009. Since 2014, Mr. Timchenko has been Chairman of the Russian Council of the NPO Russian Chinese Business Council and has served as Vice President of the Olympic Committee of the Russian Federation. Mr. Timchenko is Chairman of the Board of Directors and President of the Ice Hockey Club SKA St. Petersburg. He is also Chairman of the Continental Hockey League (KHL). Mr. Timchenko is Chairman of the Public Council of assistance to OKR. Mr. Timchenko was a member of the Board - 234-

of Directors of Airfix Aviation OY from 2009 to 2012. Mr. Timchenko has more than 20 years of experience in Russian and international energy sectors and he has interests in trading, logistics and transportation-related companies. Mr. Timchenko began his career in 1976 at the Izjorskii Factory in Leningrad, an industrial plant which produced components for the energy industry. From 1982 to 1988, Mr. Timchenko served as Senior Engineer at the Ministry of Foreign Trade. In 1988, Mr. Timchenko became Vice President of Kirishineftekhimexport, the export and trading arm of the Kirishi refinery in the Leningrad region. In 1991, Mr. Timchenko started working for Urals Finland, which specialises in oil and petrochemical trading. From 1994 to 2001, Mr. Timchenko served as Managing Director of IPP OY Finland and IPP AB Sweden, which specialise in oil and petrochemical trading and logistics. In 1997, Mr. Timchenko co-founded Gunvor, a leading independent oil trading company. Mr. Timchenko graduated from Leningradsky Mechanical University in 1976 with a degree in Electromechanical Engineering.

Peter Lloyd O'Brien has been Director of the Company since 2018. Currently, Mr. O'Brien serves as Chairman of the Audit Committee and a member of the Human Resources and Remuneration Committee of the Board of Directors. Since 2012, Mr. O'Brien has been a member of the Board of Directors in JSC "Pipe metallurgical company", and PJSC "TransFin-M" (until 2019). In 2018, he was a member of the Board of Directors in Regalwood Global Energy (USA) and Sberbank CIB USA (New York). From 2015 to 2018, Mr. O'Brien was a member of the Board of Directors in PJSC "T plus" and, from 2016 to 2018, in PJSC "TransContainer". Since 2019, has been a member of Advisory Board of Invitro Holding Limited (Cyprus) From 2006 to 2011, Mr. O'Brien was a Chief Financial Officer in ROSNEFT, from 2000 to 2006 - Co-Head of Investment Banking (Russia) at MORGAN STANLEY, from 1995 to 1998 - Vice President, Equities (Troika Dialog), DIALOG GROUP. Mr. O'Brien graduated from Duke University with a Bachelor's degree in 1991. In 2000, Mr. O'Brien obtained an MBA degree from the School of Business Columbia and, in 2011 he graduated from Harvard Business School.

Li Cheng Feng has been Director of the Company since 2018. Since 2018 Mr. Feng has served as Director General for the Chemical Department at Sinopec Corporation. He has held various positions at Sinopec since 2014 including those of Chairman of SINOPEC Yangzi Petrochemical, President of Sinopec Wuhan Petrochemical and Chairman of Sinopec-SK Wuhan Petrochemical. He was also Chairman of BASF-YPC Company Limited in 2016-2018. Mr. Feng obtained a Master's degree in Chemical Engineering from Zhe-Jiang University in 1988.

Management Board

The Company's Management Board consists of seven members. The Company's Management Board is responsible for the day-to-day management of the Company's operations and participates in the development and execution of the Company's strategy. The Company's Management Board is also responsible for managing the Company's assets to maximise their value and returns, improving the efficiency of internal control and risk management systems, and ensuring the protection of shareholders' rights and interests. According to the Company's internal regulations with respect to the Company's Management Board, the Company's Management Board is formed by the Board of Directors from the Company's senior executives based on the recommendations of the Company's Sole Executive Body.

The following table sets forth certain information with respect to the members of the Company's Management Board as of the date of this Prospectus. Members of the Company's Management Board are also referred to herein as senior managers.

Year of Year Name Birth Position appointed

Dmitry Konov ...... 1970 Chairman of the Company's Management Board 2007 - 235-

Year of Year Name Birth Position appointed

Mikhail Karisalov ...... 1973 Member of the Company's Management Board 2007 Alexey Kozlov ...... 1982 Member of the Company's Management Board 2015 Sergey Lukichev ...... 1964 Member of the Company's Management Board 2011 Kirill Shamalov...... 1982 Deputy Chairman of the Company's Management Board 2017 Alexander Petrov ...... 1981 Member of the Company's Management Board 2016 Vladimir Razumov ...... 1944 Deputy Chairman of the Company's Management Board 2007

For the biography of Dmitry Konov, see "— Board of Directors".

Mikhail Karisalov joined the Group in 2003. During the period from 2003 to 2006, Mr. Karisalov held positions of Advisor to the President, Director of Procurement and Head of Logistics and Capital Construction. From 2006 to 2011, Mr. Karisalov was been Vice President – Head of Hydrocarbon Feedstock Department of the Management Company. Since 2007, Mr. Karisalov has been a member of the Company's Management Board, and since 2009, he has been a member of the Management Board of the Management Company. From 2011 to 2012, Mr. Karisalov served as Executive Director of the Management Company. Since 2012, he has served as a member of the Management Board of the Management Company. From 2006 to 2008, Mr. Karisalov also served as General Director of OJSC SiburTyumenGaz, and from 2009 to 2012, as General Director of LLC Tobolsk-Polymer. Mr. Karisalov was a member of the Board of Directors of LLC Yuzhno- Priobskiy GPP from 2007 to 2016 and a member of the Board of Directors of LLC Tobolsk- Polymer from 2009 to 2012. Mr. Karisalov is currently Chairman of the Board of Directors of LLC STGM. Since 2016, Mr. Karisalov has served as COO of the Management Company. Since February 2018, Mr. Karisalov has been the Sole Executive Body of the Management Company, together with Mr. Konov, but each with a different scope of authority. Prior to joining the Group, Mr. Karisalov served as General Director of LLC Oblkonservprom from 1997 to 2003. Since 2016, Mr. Karisalov has served as a member of the Board of Directors of JSC "NIPIGAS". Mr. Karisalov graduated from the Russian Civil Service Academy under the President of the Russian Federation in 1998 with a degree in Management and Economics. In 2009, Mr. Karisalov obtained a degree in State and Municipal Management from the West-Siberian Institute for Humanities, and completed a professional retraining course on Chemical Technology of Natural Energy Sources and Carbon Materials at Tyumen State Oil and Gas University in 2010.

Alexey Kozlov joined the Group in April 2015. Since April 2015, Mr. Kozlov has been a member of the Company's Management Board and a member of the Management Board and Managing Director of the Management Company. Prior to joining SIBUR, Mr. Kozlov held various positions in the Russian Ministry for Economic Development, including Deputy Head of State Property Management, Chief Counsellor at the Department of Priority National Projects, Assistant to the Deputy Chairman in the Government of the Russian Federation and Head of the Department of Social Development of the Government of the Russian Federation. Mr. Kozlov graduated from the Moscow State Law University in 2004 with a degree in Law (with honours). Mr. Kozlov holds a Ph.D. in Law.

Sergey Lukichev joined the Company in 2004. From 2004 to 2011, Mr. Lukichev served as Director of SIBUR's Economic Security Department. Since September 2011, Mr. Lukichev has been a member of the Company's Management Board. From 1986 to 2004, Mr. Lukichev held various positions in the Russian military. Mr. Lukichev graduated from the Perm Krasnoznamennoe High Command Military Academy in 1986 with a degree in Physics and Power Plants.

For the biography of Kirill Shamalov, see "— Board of Directors".

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Alexander Petrov joined the Company in 2006. Mr. Petrov has been a member of the Company's Management Board and Managing Director for Economics and Finance since February 2016. From 2006 to 2016, Mr. Petrov held various positions at SIBUR and served as Head of the Economics Department, CFO at JSC SiburTyumenGaz, Financial Director of the Hydrocarbons Division, and Director for Financial Controlling. From 2002 to 2006, Mr. Petrov was an audit consultant and a senior adviser at PricewaterhouseCoopers Audit. Mr. Petrov graduated from the Finance Academy under the Government of the Russian Federation (currently, the Financial University under the Government of the Russian Federation) with a degree in Finance in 2003. In 2014, Mr. Petrov obtained an Executive MBA degree from INSEAD.

For the biography of Vladimir Razumov, see "— Board of Directors".

Internal Audit Commission

The Company's internal audit commission (the "Internal Audit Commission"), whose activities are governed by the Company's charter and internal regulations with respect to the Internal Audit Commission, oversees and coordinates audits of the Company's financial and economic activity.

The Company's Internal Audit Commission currently consists of three members:

Year of Year Name Birth Position appointed Guoming Hou ...... 1964 Member of the Internal Audit Commission 2019 Sergei Petrov ...... 1981 Member of the Internal Audit Commission 2019 Elena Rapotina ...... 1982 Member of the Internal Audit Commission 2018

Corporate Governance Practices

The supreme governing body of the Company is the General Meeting of Shareholders which is empowered to decide on the issues expressly set forth in the Federal Law No. 208-FZ on Joint Stock Companies (the "Joint Stock Companies Law") and the Company's charter, including election of the Board of Directors.

The Board of Directors currently consists of 12 persons, among which four directors are independent (in accordance with director independence criteria established by Russian law). The members of the current Board of Directors were elected by the Annual General Meeting of Shareholders held on 8 April 2019 and will serve until the next Annual General Meeting of Shareholders unless the board in its entirety is terminated prior to the expiration of its term upon a decision of the Company's shareholders. The Board of Directors, inter alia, determines the Company's strategic priorities, approves annual and long-term business plans and annual investment programmes, oversees the Company's financial activities and internal controls, and recommends on dividends payment.

Committees of the Board of Directors

The Board of Directors has three committees: the Audit Committee, the Human Resources and Remuneration Committee and the Strategy and Investments Committee.

Audit Committee

The Audit Committee consists of four members. The primary objective of the Audit Committee is to develop and make recommendations to the Board of Directors concerning: (i) conducting an annual independent external audit of the Company's financial statements, including the IFRS financial statements; (ii) the independent external auditor's qualifications, the quality of the services rendered by the auditor, and whether the auditor meets independence requirements; and - 237-

(iii) assessing the effectiveness of the internal control and risk management systems and developing recommendations for their further improvement.

The members of the Audit Committee are Mr. Peter Lloyd O'Brien (Chairman of the Audit Committee), Mr. Andrei Vernikov, Mr. Alexey Komissarov and Mr. Sergey Vasnetsov. All of them are independent Directors.

Human Resources and Remuneration Committee

The Human Resources and Remuneration Committee consists of four members. It develops the Group's HR policy, reviews the Company's annual performance indicators and annual and semi- annual results of their execution, and provides recommendations on the Company's long-term incentive programme. The Human Resources and Remuneration Committee submits recommendations to the Board of Directors on improvements in HR policy of the Company and the Management Company, and the qualification criteria for an Independent Director. The Human Resources and Remuneration Committee compares the Company's HR policy and incentive programmes with peers and market practices, and informs the Board of Directors of the results of such analysis.

The members of the Human Resources and Remuneration Committee are Mr. Alexey Komissarov (Chairman of the Human Resources and Remuneration Committee), Mr. Alexander Dyukov, Mr. Andrei Vernikov and Mr. Peter Lloyd O'Brien.

Strategy and Investments Committee

The Strategy and Investments Committee consists of seven members. This committee is responsible for developing and making recommendations to the Board of Directors on defining the Company's priority areas for development and the Company's long-term strategy, objectives and tasks, as well as the Company's annual and long-term investment programmes. The committee evaluates the Company's investment process management and strategic planning process. It also evaluates the policy on cooperation with investors and shareholders and makes recommendations to the Board of Directors for improving the policy. This committee also reviews issues related to the Company's establishment of commercial and non-commercial organisations, as well as mergers, acquisitions, divestments or pledges of the Group's assets.

The members of the Strategy and Investments Committee are Mr. Alexander Dyukov (Chairman of the Strategy and Investments Committee), Mr. Vladimir Razumov, Mr. Gennady Timchenko, Mr. Li Chengfeng, Ms. Wang Dan, Mr. Sergey Vasnetsov and Mr. Kirill Shamalov.

Remuneration of directors and key management

Remuneration of key management personnel amounted to RUB 1,415 million, RUB 2,119 million, RUB 1,836 million and RUB 1,401 million, net of social taxes for the six months ended 30 June 2019 and the years ended 31 December 2018, 2017 and 2016, respectively. The Company's senior managers are entitled to salaries, bonuses, voluntary medical insurance and other employee benefits.

The Company accrued RUB 51 million, RUB 56 million, RUB 102 million, RUB 98 million and RUB 88 million net of social taxes, to Board of Directors members as part of their compensation for the six months ended 30 June 2019 and 2018, and the years ended 31 December 2018, 2017 and 2016, respectively.

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Directors and Officers Insurance

The Group also provides D&O insurance to its directors and key members of the senior management. This D&O insurance covers claims (subject to certain exceptions) made by any person in connection with actions of the insured Group's directors and senior managers undertaken in the course of fulfilment of their duties; the liability limit is up to RUB 3.6 billion.

Loans to Directors and Senior Managers

In the first half of 2016, the Group issued loans to entities controlled by several members of the Company's Board of Directors and key management personnel for a total amount of RUB 1,203 million, part of which was paid back in cash in the second half of 2016. As of 31 December 2016, the outstanding balance of these loans was RUB 120 million, which was paid back in cash in the first half of 2017. The Group provided loans to its related parties on an arm's length basis. As of 30 June 2019, there were no loans issued by the Group to entities controlled by the members of the Company's Board of Directors and key management personnel.

Interests of Directors and Senior Managers

Certain of the Company's Directors and senior managers have direct and/or beneficial interest in the Company's shares. See "Shareholders". Except as set forth under "Shareholders", none of the Company's Directors and senior managers has any interest in the Company's shares.

Conflicts

There are no potential conflicts of interest between any duties owed to the Company by any Director or senior manager and his or her private interests.

Certain Compliance Matters

In 2018, an independent third party certified that the management system of the Company had been audited and found to be in accordance with ISO 19600:2014 standard, which covers anti- corruption matters, prevention of insider trading, identification and monitoring of conflicts of interest, prevention of anti-trust violations and matters relating to corporate entertainment.

Litigation Statement about Directors and the Senior Managers

At the date of this Prospectus, none of the members of the Board of Directors or the Company's Management Board has in the previous five years:

• had any convictions for fraudulent offences; or

• been subject to official public incrimination or sanction by a statutory or regulatory authority (including a professional body) nor has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of a company.

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SHAREHOLDERS

The Issuer is a direct wholly-owned subsidiary of the Company.

Beneficial Shareholders of the Company

The following table sets forth the beneficial shareholders of record of the Company as of the date of this Prospectus.

Percentage of the Beneficial shareholder Number of shares Company's share capital Mr. Leonid Mikhelson ...... 1,056,176,759 48.48% Mr. Gennady Timchenko ...... 370,341,447 17.00% Sinopec(1) ...... 217,847,910 10.00% The Silk Road Fund(2) ...... 217,847,910 10.00% Messrs. Alexander Djukov, Mikhail Karisalov and current and previous managers of the Company ...... 127,373,329 5.85% Mr. Kirill Shamalov ...... 84,557,680 3.88% Mr. Dmitry Konov ...... 66,383,645 3.24% Other shareholders ...... 37,950,420 1.55% ______Notes: (1) Following the acquisition by Sinopec of a 10.0% equity stake in the Company on 16 December 2015. As a strategic investor, Sinopec has a right to nominate a representative to the Board of Directors and the Management Board of the Management Company. (2) Following the acquisition by The Silk Road Fund, a Chinese investment fund specialising in outbound investment in infrastructure, energy, industrialisation and financial cooperation projects under China's Belt and Road Initiative, of a 10.0% equity stake in the Company on 25 January 2017. The Silk Road Fund is a financial investor and is entitled to nominate a representative to the Board of Directors.

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RELATED PARTY TRANSACTIONS

In accordance with IFRS, parties are generally considered to be related if: (i) the party is part of the Group's key management or the Board of Directors; (ii) the party has the ability to control or jointly control the other party; (iii) both parties are under common control; or (iv) one party can exercise significant influence over the other party in the financial and operational decision-making process. In considering each possible related-party relationship, the Group's management pays attention to the substance of the relationship, and not merely the entities' legal form. Also, management applies judgement to decide whether party could exercise significant influence over the Group, considering not merely the percentage of shareholding in the Group and governing bodies representation, but actual ability and participation in the Group's decision making.

The significant transactions that the Group entered into with parties with whom it had such related- party relationships during the six months ended 30 June 2019 and 2018 and the years ended 31 December 2018, 2017 and 2016 or had a significant balance outstanding as of 30 June 2019, 31 December 2018, 2017 and 2016 are set out below. See also Note 24 to the Interim Financial Information and Note 33 to the relevant Annual Financial Statements.

Significant transactions with parties under control or joint control of Mr. Gennady Timchenko

During the years ended 31 December 2017 and 2016, the Group entered into transactions with JSC Stroytransgaz and its subsidiaries (jointly, "JSC Stroytransgaz Group"), controlled by Mr. G. N. Timchenko, who is a member of key management personnel of the Group. These transactions primarily included purchases by the Group from JSC Stroytransgaz Group of construction, repair and maintenance services.

The Group had the following transactions with JSC Stroytransgaz Group for the period indicated:

Six months ended Year ended 30 June 31 December 2019 2018 2018 2017 2016 (RUB millions) Operating and investing activities Sales of other goods and services ...... — — — 1 4 Purchases of construction and repair and maintenance services ...... — — — (2) (680)

Significant transactions with parties under the control or joint control of PROMSTROI GROUP

JSC PROMSTROI-GROUP, jointly with its subsidiaries ("PROMSTROI GROUP"), is one of the providers of construction services to the Group. In 2016, the Company and PROMSTROI GROUP signed a strategic partnership agreement aimed at developing a reliable local provider of construction services by the way of: (i) monitoring operational and financial performance of PROMSTROI GROUP on a long-term basis; and (ii) jointly participating in the construction business opportunities as a local EPC contractor by combining an engineering and construction expertise of NIPIGAS and PROMSTROI GROUP. In 2016-2017, as the first step of the partnership agreement's realisation, several Group's representatives were appointed to the governing bodies of PROMSTROI GROUP under an agreement between JSC PROMSTROI- GROUP and the Group on the conditions of reimbursement of the Group's costs.

Further, in January 2018, the Group's representatives got the positions of the Chief Executive Officer and the Chairman of the Board of Directors of PROMSTROI GROUP. Thus, the

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management of the Group has made a judgement that since 2018 the Group is able to exercise a significant influence over PROMSTROI GROUP and treated it as a related party.

The Group had the following transactions with PROMSTROI GROUP for the periods indicated:

Six months ended Year ended 30 June 31 December 2019 2018 2018 2017 2016 (RUB millions) Operating and investing activities Purchases of construction services ...... (4,757) (6,843) (14,279) — — Sales of materials and services...... 15 80 152 — —

The Group had the following balances with PROMSTROI GROUP for the periods indicated:

As of As of 30 June 31 December 2019 2018 2017 2016 (RUB millions) Advances and prepayments for capital construction ...... 1,033 2,144 — — Trade and other payables ...... 195 1,291 — — Prepayments and advances to suppliers ...... 555 857 — Accounts payable to contractors and suppliers of property, plant and equipment ...... 579 201 — — Trade and other receivables ...... 37 60 — —

Remuneration of directors and key management

During the six months ended 30 June 2019, the Company's Board of Directors comprised 12 individuals (in January-March 2018, it comprised 11 individuals and since April 2018 it comprised 12 individuals), including shareholder representatives. During 2017, the Company's Board of Directors comprised 11 individuals (in 2016 comprised 10 individuals), including shareholder representatives. Members of the Board of Directors are entitled to annual compensation, as approved by the Annual General Shareholders' Meeting.

In the first half of 2019 and in 2018, the number of key management personnel comprised 16 individuals. In January 2017, the number of key management personnel comprised 16 individuals and, since February 2017, it comprised 15 individuals. In the first half of 2016, the number of key management personnel comprised 15 individuals and, in the second half of 2016, it comprised 16 individuals.

Key management personnel is entitled to salaries, bonuses, voluntary medical insurance and other employee benefits. Remuneration of key management personnel amounted to RUB 1,415 million, RUB 942 million, RUB 2,119 million, RUB 1,836 million and RUB 1,401 million net of social taxes for the six months ended 30 June 2019 and 2018, and for the years ended 31 December 2018, 2017 and 2016, respectively.

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Joint ventures

The Group had the following transactions with its joint ventures in the periods indicated:

Six months ended Year ended 30 June 31 December 2019 2018 2018 2017 2016 (RUB millions) Operating and investing activities Purchases of materials, goods and services ... (18,701) (4,923) (11,128) (6,489) (8,129) Purchases of processing services ...... (468) (457) (972) (996) (949) Sales of materials, goods and services ...... 7,080 5,156 12,062 8,413 7,186 Interest income ...... — — — 60 94 Interest expense ...... — — — (34) (135) Other financial income ...... — — — — 5

The Group had the following balances with its joint ventures in the periods indicated:

As of As of 30 June 31 December 2019 2018 2017 2016 (RUB millions) Trade and other receivables ...... 1,853 1,561 702 1,843 Loans receivable ...... 312 1,878 1,507 846 Trade and other payables ...... 3,429 3,030 2,322 1,621 Short-term debt ...... — — 175 — Long-term debt ...... — — — 825

The Group provided and received loans to and from its joint ventures on the market terms.

The Group has a number of long-term contracts with joint ventures, including contracts for procurement of processing services and purchase of finished goods. Also, the Group has several agency arrangements with its joint ventures under which the Group is providing marketing, selling, construction management and procurement services and receiving transportation services. The agent remuneration earned by the Group under the agency arrangements is included in sales of materials, goods and services line. The balances outstanding under the agency arrangements are included into trade and other payables and receivables lines.

Loans to Directors and Senior Managers

In the first half 2016, the Group issued loans to entities controlled by several members of the Company's Board of Directors and key management personnel for a total amount of RUB 1,203 million, part of which was paid back in cash in the second half of 2016. As of 31 December 2016, the outstanding balance of these loans was RUB 120 million, which was paid back in cash in the first half 2017. The Group provided loans to its related parties on an arm's length basis.

NIPIGAS

In June 2016, the Company sold a 44% ownership interest (representing 50% of the voting shares) in the Group's subsidiary, NIPIGAS, to certain companies controlled by some of its shareholders, including those that simultaneously serve as senior Group management. As a result, the effective percentage of NIPIGAS's share capital held by the Group decreased to 45% (representing 50% of the voting shares).

The Group has continued to consolidate NIPIGAS as it has retained control over its relevant activities as defined by IFRS 10 "Consolidated Financial Statements". The Group has made a significant judgement that it has retained control over NIPIGAS as the Group and its key - 243-

management can cumulatively control a majority of votes at the meetings of NIPIGAS's governing bodies. Also, the Group holding 50% of the voting shares can block any decisions by NIPIGAS's governing bodies.

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DESCRIPTION OF THE ISSUER

The Issuer was incorporated in Ireland on 8 November 2012, with the name SIBUR Securities Limited and registered number 519781 as a private company with limited liability under the Companies Acts 1963-2012 of Ireland and was subsequently re-registered as a designated activity company limited by shares on 25 May 2016 in accordance with the provisions of the Companies Act 2014 (as amended) (the "Companies Act") and its name changed to SIBUR Securities Designated Activity Company. The registered office of the Issuer is 10 Earlsfort Terrace, Dublin 2, Ireland.

As the Issuer is incorporated in Ireland it will be subject to certain Irish law insolvency risks which are set out in "Risk Factors — Risks Relating to the Notes and the Trading Market — The Issuer is subject to risks related to the location of its centre of main interest, the appointment of examiners and the claims of preferred creditors under Irish Law".

Share Capital and Ownership

The authorised share capital of the Issuer is EUR 500,000 divided into 500,000 ordinary shares of par value EUR 1.00 each (the "Shares"). The Issuer has issued one Share, which is fully paid and is held by PJSC "SIBUR HOLDING".

The Issuer is a wholly-owned subsidiary of PJSC "SIBUR HOLDING".

Pursuant to the Articles of Association of the Issuer, the Board of Directors of the Issuer is responsible for the Issuer's management. Under Irish law, for as long as the Issuer is solvent the Board of Directors is required to act in the best interests of the Issuer.

The relationship between the Issuer and PJSC "SIBUR HOLDING", the sole shareholder of the Issuer, is governed by the memorandum and articles of association of the Issuer and Irish law, including the Companies Act and regulations made thereunder.

Abacus Limited (the "Corporate Services Provider"), acts as the corporate services provider for the Issuer. Pursuant to the terms of an engagement letter entered into on 18 May 2017 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 and conditions 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 30 days' written notice to the other party.

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 - 245-

capital by the issue of debt securities and to use an amount equal to the proceeds of each such issuance to advance loan to the Group companies.

Since its incorporation, the Issuer has not engaged in any material activities other than those incidental to its registration as a private company and re-registration as a designated activity company under the Companies Act, those related to the previous issuance of guaranteed notes and the related loans to Group companies with the proceeds of such issuances and those related to the issue of the Notes. The Issuer has no employees.

Directors and Company Secretary

The Issuer's Constitution provides 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:

• Katherine O'Driscoll, 83 Botanic Avenue, Glasnevin, Dublin 9, Ireland;

• Roddy Stafford, 10 Herbert Park, Ballsbridge, Dublin 4, Ireland; and

• Denis Rozhok, App. 60, Bld 11/1, Vasnetsov Alley, Moscow, Russian Federation.

There are no potential conflicts of interest between any duties owed to the Issuer by any Director or senior manager and his or her private interests.

The Company Secretary is Bradwell Limited of 10 Earslfort Terrace, Dublin 2, Ireland.

Financial Statements

The Issuer published its most recent financial statements in respect of the period ending on 31 December 2017 prepared in accordance with International Financial Reporting Standards as adopted by the European Union and audited by the independent auditors, PricewaterhouseCoopers of 1 Spencer Dock, North Wall Quay, Dublin 1, Ireland, who are chartered accountants and are members of the Institute of Chartered Accountants in Ireland and registered auditors qualified to practice in Ireland. The Issuer will not prepare interim financial statements. The financial year of the Issuer ends on 31 December in each year.

Each year, a copy of the audited profit or loss account and balance sheet of the Issuer together with a report of the directors and the independent auditors thereon is required to be filed in the Irish Companies Registration Office within 28 days of the annual return date of the Issuer and is available for inspection. The profit or loss account and balance sheet can be obtained free of charge from the registered office of the Issuer.

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TERMS AND CONDITIONS OF THE NOTES

The U.S.$500,000,000 3.45 per cent guaranteed notes due 2024 issued by SIBUR Securities Designated Activity Company (the "Issuer") (the "Notes", which expression includes any further Notes issued pursuant to Condition 15 and forming a single series therewith) are unconditionally and irrevocably guaranteed by PJSC "SIBUR Holding" (the "Guarantor"). The Notes were authorised by a meeting of the board of directors of the Issuer held on 5 September 2019.

The Notes are constituted by a trust deed dated 23 September 2019 (as amended or supplemented from time to time, the "Trust Deed") between the Issuer and Citibank, N.A., London Branch (the "Trustee", which expression shall include all persons for the time being who are the trustee or trustees under the Trust Deed) as trustee for the Noteholders (as defined below) of the Notes. The Guarantor has entered into a separate deed of guarantee with the Trustee, dated on or about the date of the Trust Deed (the "Deed of Guarantee").

These terms and conditions (the "Conditions") include summaries of, and are subject to, the detailed provisions of the Trust Deed and the Deed of Guarantee. The Issuer and the Guarantor have entered into an agency agreement dated 23 September 2019 (as amended or supplemented from time to time, the "Agency Agreement") with the Trustee, Citibank N.A., London Branch as principal paying agent (the "Principal Paying Agent" and, together with any other paying agents appointed under the Agency Agreement, the "Paying Agents"), Citigroup Global Markets Europe AG as registrar (the "Registrar") and Transfer Agents named therein. The Registrar, Paying Agents and Transfer Agents are together referred to herein as the "Agents".

Copies of the Trust Deed, the Deed of Guarantee and the Agency Agreement are available for inspection during normal business hours at the registered office of the Issuer (being at the date hereof 10 Earlsfort Terrace, Dublin 2, Ireland), the specified office of the Trustee (being at the date hereof Citigroup Centre, Canada Square, Canary Wharf, London, E14 5LB, United Kingdom) and at the specified offices of the Agents. The Noteholders (as defined below) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the Deed of Guarantee and are deemed to have notice of those provisions of the Agency Agreement applicable to them.

Capitalised terms used but not defined in these Conditions shall have the respective meanings given to them in the Trust Deed and the Deed of Guarantee.

1. Form and Denomination

The Notes are issued in fully registered form, serially numbered and without interest coupons attached, in minimum denominations of U.S.$200,000 or integral multiples of U.S.$1,000 in excess thereof (each an "Authorised Denomination"). The Notes may be transferred only in amounts not less than an Authorised Denomination.

The Notes are initially issued in global, fully registered form, and will only be exchangeable for Notes in definitive, fully registered form ("Definitive Notes") in the limited circumstances set forth in the Agency Agreement.

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2. Guarantee and Status

2.1 Guarantee

The Guarantor has, pursuant to the Deed of Guarantee, unconditionally and irrevocably, guaranteed the payment when due of all sums expressed to be payable by, and all other payment obligations of, the Issuer under the Trust Deed and the Notes (the "Guarantee").

2.2 Status

The Notes constitute direct, unsubordinated and (subject to Condition 4.1) unsecured obligations of the Issuer and shall at all times rank pari passu and rateably without any preference among themselves. The Guarantee constitutes direct, unsubordinated and (subject to Condition 4.1) unsecured obligations of the Guarantor. Each of the Issuer and the Guarantor shall ensure that at all times the claims of the Noteholders against them under the Notes and the Guarantee, respectively, rank in right of payment at least pari passu with the claims of all their other present and future unsecured and unsubordinated creditors, save those whose claims are preferred by any mandatory operation of law.

3. Register, Title and Transfers

3.1 Register

The Registrar shall maintain a Register in respect of the Notes (the "Register") outside the United Kingdom at the specified office for the time being of the Registrar in accordance with the provisions of the Agency Agreement and shall record in the Register the names and addresses of the Noteholders, particulars of the Notes and all transfers and redemptions thereof. 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.

3.2 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 a court of competent jurisdiction or applicable law) 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 Note relating thereto (other than the endorsed form of transfer) or any notice of any previous loss or theft of such Definitive Note) and no person shall be liable for so treating such Holder.

3.3 Transfers

Subject to Conditions 3.7 and 3.8, a Note may be transferred in whole or in part in an Authorised Denomination upon surrender of the relevant Definitive Note representing that Note, together with the form of transfer (including any certification as to compliance with restrictions on transfer included in such form of transfer endorsed thereon) (the "Transfer Form"), duly completed and executed, at the specified office of a Transfer Agent or of the Registrar, together with such evidence as such Transfer Agent or the Registrar may reasonably require to prove the title of the transferor and the authority of the persons who have executed the Transfer Form. Where not all the Notes represented by the surrendered Definitive Note are the subject of the transfer, a new Definitive Note in respect of the balance not transferred will be delivered by the Registrar to the transferor in accordance - 248-

with Condition 3.4. Neither the part transferred nor the balance not transferred may be less than U.S.$200,000.

3.4 Registration and delivery of Definitive Notes

Within five business days of the surrender of a Definitive Note in accordance with Condition 3.3, the Registrar shall register the transfer in question and deliver a new Definitive Note to each relevant Holder at the specified office of the Registrar or (at the request of the relevant Noteholder) at the specified office of a Transfer Agent or (at the request and risk of such relevant Holder) send it by uninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevant Holder. In this Condition 3.4, "business day" means a day, other than Saturday or Sunday, on which banks are open for business in the place of the specified office on the relevant Transfer Agent or the Registrar (as the case may be).

3.5 Partial Redemption in Respect of Notes

In the case of an exercise of the Issuer's option in respect of, or a partial redemption of, a holding of Notes represented by a single Definitive Note, a new Definitive Note shall be issued to the Holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. New Definitive Notes shall only be issued against surrender of the existing Definitive Notes to the Registrar or any Transfer Agent.

3.6 No Charge

The registration of the transfer of a Note shall be effected without charge to the Holder or transferee thereof, but against such indemnity from the Holder or transferee thereof as the Registrar may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such transfer.

3.7 Closed periods

Noteholders may not require the transfer of a Note to be registered (i) during the period of 15 days ending on (and including) the due date for redemption of that Note, (ii) during the period of 15 days prior to (and including) any date on which Notes are called for redemption by the Issuer pursuant to Condition 6.2, Condition 6.3, Condition 6.4 and Condition 6.5, (iii) after Notes have been called for redemption or (iv) during the period of seven days ending on (and including) any Record Date.

3.8 Regulations concerning Transfer and Registration

All transfers of Notes and entries on the Register are subject to the detailed regulations concerning the transfer and registration of Notes set out in Schedule 1 of the 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 sent by the Registrar free of charge to any person who so requests and will be available at the specified office of the Registrar.

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4. Covenants

So long as any of the Notes remains outstanding:

4.1 Negative Pledge

Neither the Issuer nor the Guarantor shall, and the Issuer and the Guarantor shall procure that no Material Subsidiary shall, directly or indirectly, create, incur, assume, permit or suffer to exist any Lien, other than a Permitted Lien, on any of its properties or assets, whether owned at the Issue Date or thereafter acquired, or on any income, revenue or profits therefrom, to secure for the benefit of holders of any Relevant Indebtedness:

4.1.1 payment of any sum due in respect of any such Relevant Indebtedness;

4.1.2 any payment under any guarantee of any such Relevant Indebtedness; or

4.1.3 any payment under any indemnity or other like obligation relating to any such Relevant Indebtedness,

without, at the same time or prior thereto, effectively providing, for so long as such Relevant Indebtedness is so secured, that the Issuer's obligations under the Notes or the Guarantor's obligations under the Guarantee, as the case may be, (a) are secured at least equally and rateably with such other Relevant Indebtedness or (b) benefit from such other security or other arrangements as either (i) the Trustee shall in its absolute discretion deem not materially less beneficial to the interests of the Noteholders or (ii) shall be approved by an Extraordinary Resolution (as defined in the Trust Deed).

4.2 Merger and Consolidation

(i) Neither the Issuer nor the Guarantor shall enter into any reorganisation (by way of a merger, accession, division, separation or transformation, or other bases or procedures for reorganisation contemplated or as may be contemplated from time to time by applicable Irish or Russian legislation, as the case may be, as these terms are construed by applicable Irish or Russian legislation, as the case may be) (together and individually a "Reorganisation"), and (ii) the Guarantor shall ensure that, no Material Subsidiary (A) enters into any Reorganisation, or (B) in the case of a Material Subsidiary incorporated in a jurisdiction other than Russia participates in any type of corporate reconstruction or other analogous event (as determined under the legislation of the relevant jurisdiction) if (in the case of either (i) or (ii) above) any such Reorganisation or other type of corporate reconstruction would have a Material Adverse Effect. Notwithstanding anything set out in this Condition 4.2, the Reorganisation or other analogous event wholly (i) between Subsidiaries (except the Issuer) of the Guarantor and (ii) between the Guarantor and its Subsidiaries (except the Issuer), provided that the surviving entity will succeed and fully assume the Guarantor's obligations under the Guarantee, shall be permitted.

4.3 Reports

4.3.1 The Guarantor will furnish to the Noteholders and the Trustee:

(i) within 150 days after the end of each financial year, the Financial Statements containing the audited statements of financial position of the Group as of the end of the last financial year and audited statements of profit or loss, of cash flows and of changes in equity of the Group for the last - 250-

financial year, in each case prepared in accordance with IFRS, and including complete notes to such Financial Statements and the independent auditor's report on the Financial Statements;

(ii) within 120 days after the end of the first semi-annual period of each financial year of the Guarantor thereafter the Financial Statements containing the unaudited statements of financial position of the Group as of the end of such period and unaudited statements of profit or loss, of cash flows and of changes in equity of the Group for the respective semi-annual period, and the comparable prior year periods, in each case prepared in accordance with IFRS, and including condensed notes to such Financial Statements together with a review report thereon conducted in accordance with International Standard on Review Engagements No. 2410 (or such replacement standard in force at such time);

(iii) the Guarantor shall also furnish to the Stock Exchange such information as it may require as necessary in connection with maintaining the listing and admission to trading of the Notes on the Stock Exchange; and

(iv) in addition, so long as any of the Notes are restricted securities (as defined in Rule 144 under the Securities Act) and during any period during which the Issuer and the Guarantor are not subject to the reporting requirements of the Exchange Act or exempt therefrom pursuant to Rule 12g3-2(b), the Issuer and the Guarantor will furnish to any Holder or beneficial owner of Notes initially offered and sold in the United States to Qualified Institutional Buyers pursuant to Rule 144A under the Securities Act, and to prospective purchasers in the United States designated by such Holder or beneficial owners, upon request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act,

provided that each set of the Financial Statements delivered by it pursuant to Condition 4.3.1(i) and Condition 4.3.1(ii) shall also be made available on the Guarantor's website.

5. Interest

The Notes bear interest on their outstanding principal amount from and including the Issue Date at the rate of 3.45 per cent per annum, payable semi-annually in arrear on 23 March and 23 September in each year (each an "Interest Payment Date").

Each Note will cease to bear interest from the due date for redemption unless payment of principal is improperly withheld or refused. In such event it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Holder, and (b) the day which is seven days after the Trustee or the Principal Paying Agent has notified Noteholders of receipt of all sums due in respect of all the Notes up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant Noteholders under these Conditions).

If interest is required to be calculated for a period of less than a complete Interest Period (as defined below), the day-count fraction will be determined on the basis of a 360-day - 251-

year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed.

In these Conditions, the period beginning on and including the Issue Date and ending on but excluding the first Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next succeeding Interest Payment Date is called an "Interest Period".

Interest in respect of any Note shall be calculated per U.S.$1,000 in principal amount of the Notes (the "Calculation Amount"). The amount of interest payable per Calculation Amount for any period shall be equal to the product of 3.45 per cent., the Calculation Amount and the day-count fraction for the relevant period, rounding the resulting figure to the nearest cent (half a cent being rounded upwards).

6. Redemption and Purchase

6.1 Final redemption

Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their principal amount on 23 September 2024 (the "Maturity Date"). The Notes may not be redeemed at the option of the Issuer or the Guarantor other than in accordance with this Condition 6.

6.2 Redemption for tax reasons

The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days' notice to the Noteholders in accordance with Condition 16 and to the Trustee and Agents (which notice shall be irrevocable) at the principal amount thereof, together with interest accrued to the date fixed for redemption, if the Issuer or the Guarantor satisfies the Trustee immediately prior to the giving of such notice that (i) it has or will become obliged to pay additional amounts as provided or referred to in Condition 8.1, or the Guarantor would be unable to procure payment by the Issuer and in making payment itself would be required to pay such additional amounts, in each case as a result of any change in, or amendment to, the laws, treaties or regulations of any Relevant Jurisdiction, or any change in the published application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the Issue Date and (ii) such obligation cannot be avoided by the Issuer or the Guarantor, as the case may be, taking reasonable measures available to it; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or the Guarantor, as the case may be, would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer or the Guarantor, as the case may be, shall deliver to the Trustee (x) an Officer's Certificate stating that the obligation referred to in (i) above cannot be avoided by the Issuer or the Guarantor, as the case may be, taking reasonable measures available to it and the Trustee shall be entitled to accept such Officer's Certificate as sufficient evidence of the satisfaction of the conditions precedent set out in (ii) above, in which event it shall be conclusive and binding on the Noteholders and (y) an opinion of independent legal advisers of recognised standing to the effect that the Issuer or the Guarantor, as the case may be, has or will become obliged to pay such additional amounts as a result of such change or amendment. All Notes in respect of which any such notice of redemption is given under and in accordance with this Condition shall be redeemed on the date specified in such notice in accordance with this Condition. - 252-

6.3 Redemption at Make Whole

At any time prior to the Maturity Date, but on one occasion only, the Issuer may, at its option, on giving not less than 30 nor more than 60 days' irrevocable notice to the Noteholders and to the Trustee and the Agents (the "Call Option Notice") in accordance with Condition 16 redeem the Notes in whole but not in part, at the price which shall be the following:

(i) the aggregate principal amount of the outstanding Notes; plus

(ii) interest and other amounts that may be due pursuant to these Conditions (if any) accrued but unpaid to but excluding the date on which the call option is to be settled (the "Call Settlement Date"); plus

(iii) the Make Whole Premium.

The Call Option Notice shall specify the Call Settlement Date.

For the purposes of this Condition 6.3:

"Make Whole Premium" means, with respect to a Note at any time, the excess of (a) the present value of the Notes at the Call Settlement Date, plus any required interest payments that would otherwise accrue and be payable on such Notes from the Call Settlement Date through to the Maturity Date calculated using a discount rate equal to the Treasury Rate at the Call Settlement Date plus 50 basis points, over (b) the outstanding aggregate principal amount of the Notes at the Call Settlement Date, provided that if the value of the Make Whole Premium at any time would otherwise be less than zero, then in such circumstances, the value of the Make Whole Premium will be equal to zero.

"Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity most nearly equal to the period from the Call Settlement Date to the Maturity Date. The Guarantor (on behalf of the Issuer) will obtain such yield to maturity from information compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least three Business Days (but not more than five Business Days) prior to the Call Settlement Date (or, if such Statistical Release is not so published or available, any publicly available source of similar market data selected by the Guarantor in good faith)); provided, however, that if the period from the Call Settlement Date to the Maturity Date is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one- twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Call Settlement Date to the Maturity Date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

The Guarantor (on behalf of the Issuer) shall notify the Noteholders (in accordance with Condition 16) and the Trustee and the Agents of the Make Whole Premium not less than two Business Days prior to the Call Settlement Date.

6.4 Optional Redemption at Par

The Issuer may, at any time on or after the date three months prior to the Maturity Date, on giving not less than 30 nor more than 60 days' irrevocable notice to the Noteholders - 253-

(which notice shall specify the date fixed for redemption (the "Par Optional Redemption Date")) in accordance with Condition 16 and to the Trustee and Agents, redeem the Notes in whole or in part, at the principal amount thereof, together with interest accrued and unpaid and additional amounts (if any) to but excluding the Par Optional Prepayment Date.

In the case of a partial redemption the notice to Noteholders shall also specify the nominal amount of Definitive Notes drawn and the serial numbers of the Definitive Notes to be redeemed, which shall have been drawn in such place as the Trustee may approve and in such manner as it deems appropriate, subject to compliance with any applicable laws and stock exchange or other relevant authority requirements.

6.5 Redemption in the Illegality Event

If at any time after the Issue Date, by reason of the introduction of any change in any applicable law, regulation, regulatory requirement or directive of any applicable agency, it is or would become unlawful for the Issuer or the Guarantor to perform or comply with any or all of their respective material obligations under any of the Notes, the Guarantee or the Trust Deed (an "Illegality Event") and such Illegality Event continues for more than 30 Business Days, then the Issuer shall, on giving not less than 30 nor more than 60 days' notice to the Noteholders (which notice shall specify the date fixed for redemption (the "Illegality Event Redemption Date")) in accordance with Condition 16 and to the Trustee and Agents, redeem the Notes in whole but not in part, at the principal amount thereof, together with interest accrued and unpaid and additional amounts (if any) payable in respect of any Note under these Conditions to but excluding the Illegality Event Redemption Date.

Prior to giving any notice of redemption pursuant to this Condition 6.5, the Issuer or the Guarantor, as the case may be, shall deliver to the Trustee an opinion of independent legal advisers of recognised standing to the effect that the Illegality Event has occurred.

6.6 Purchase

The Issuer, the Guarantor and any Subsidiaries of the Guarantor may at any time purchase Notes in the open market or otherwise at any price.

6.7 Cancellation

All Notes redeemed or purchased pursuant to this Condition 6 may be cancelled or held, to the extent permitted by law, and resold. Any Notes so cancelled may not be reissued or resold and the obligations of the Issuer in respect of any such Notes shall be discharged.

7. Payments

7.1 Principal, interest and other amounts

Payment of principal and interest in respect of the Notes will be made to the persons shown in the Register at the close of business on the Record Date (as defined below). Payments of all amounts other than as provided in this Condition 7.1 will be made as provided in these Conditions.

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7.2 Payments

Each payment in respect of the Notes pursuant to Condition 7.1 will 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. Payment instructions (for value on the due date or, if that is not a business day (as defined 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).

7.3 Payments subject to fiscal laws

All payments in respect of the Notes are subject in all cases to (i) any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 8 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the Code, or otherwise imposed pursuant to FATCA, or (without prejudice to the provisions of Condition 8) any law implementing an intergovernmental approach thereto. No commissions or expenses shall be charged to the Noteholders in respect of such payments.

7.4 Payments on business days

If the due date for any payment of principal or interest under this Condition 7 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 Condition 7 only, "business day" means any day on which banks are open for business in the place of the specified office of the relevant Paying Agent and, in the case of payment by transfer to a U.S. Dollar account as referred to above, on which dealings in foreign currencies may be carried on both in New York City and in such other place.

7.5 Record date

"Record Date" means the seventh business day, in the place of the specified office of the Registrar, before the due date for the relevant payment.

7.6 Agents

The initial Agents and their initial specified offices are listed below. The Issuer reserves the right to vary or terminate the appointment of all or any of the Agents at any time (with the prior written approval of the Trustee) and appoint additional or other payment or transfer agents, provided that the Issuer will at all times maintain (i) a Principal Paying Agent, (ii) a Registrar, (iii) a Transfer Agent and (iv) such other agents as may be required by any stock exchange on which the Notes may be listed. Notice of any such change will be provided to Noteholders as described in Condition 16.

8. Taxation

8.1 All payments of principal and interest in respect of the Notes by or on behalf of the Issuer or under the Guarantee by the Guarantor shall be made free and clear of, and without withholding or deduction for, or on account for, any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by or within the Relevant Jurisdiction, unless such withholding or deduction is required by law. In that event, the Issuer or (as the case may be) the Guarantor

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shall increase the relevant payment so as to result in the receipt by the Noteholders of such amounts as would have been received by them if no such withholding or deduction had been required, except that no such additional amounts shall be payable in respect of any Note:

8.1.1 held by or on behalf of a Holder which is (i) liable to such taxes, duties, assessments or governmental charges in respect of such Note or the Guarantee by reason of its (or its beneficial owners) having some connection with the Relevant Jurisdiction other than the mere holding of such Note or the benefit of the Guarantee or (ii) able to avoid such deduction or withholding by satisfying any statutory requirements or by making a declaration of non-residence or other claim to the relevant taxing authority; or

8.1.2 where (in the case of a payment of principal or interest on redemption) the relevant Definitive Note is surrendered for payment more than 30 days after the Relevant Date except to the extent that the relevant Holder would have been entitled to such additional amounts if it had surrendered the relevant Definitive Note on the last day of such period of 30 days; or

8.1.3 to a Noteholder in respect of taxes, duties, assessments or governmental charges that are imposed or withheld by reason of the failure of the Noteholder to comply with a request of, or on behalf of, the Issuer or the Guarantor addressed to the Noteholder to provide information concerning the nationality, residence or identity of such Noteholder or to make any declaration or similar claim or satisfy any information or reporting requirement, which is required or imposed by a statute, treaty, regulation, protocol or administrative practice as a precondition to exemption from all or part of such taxes, duties, assessments or governmental charges; or

8.1.4 where such withholding or deduction is required pursuant to Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, (or any regulations thereunder or official interpretations thereof) or an intergovernmental agreement between the United States and another jurisdiction facilitating the implementation thereof (or any fiscal or regulatory legislation, rules or practices implementing such an intergovernmental agreement) (any such withholding or deduction, a "FATCA Withholding"). Neither the Issuer nor any other person will be required to pay any additional amounts in respect of FATCA Withholding.

8.2 In these Conditions, "Relevant Date" means whichever is the later of (a) the date on which the payment in question first becomes due and (b) if the full amount payable has not been received in New York City by or for the account of the Principal Paying Agent or the Trustee on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Noteholders by the Issuer in accordance with Condition 16.

8.3 Any reference in these Conditions to principal or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may be

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payable under Condition 8 or any undertaking given in addition to or in substitution for it under the Trust Deed.

9. Events of Default

The Trustee at its discretion may, and if so requested in writing by Noteholders holding not less than 25 per cent of the principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) shall (subject in each case to its being indemnified and/or secured and/or pre-funded to its satisfaction), give notice to the Issuer that the Notes are immediately due and repayable at their principal amount together with accrued interest if any of the following events occurs and is continuing (each an "Event of Default"):

9.1 the Issuer, or where applicable, the Guarantor, fails to pay the principal of or any interest on any of the Notes when due (whether on the Maturity Date, on optional redemption, on required purchase, on declaration of acceleration or otherwise) and such failure continues for a period of ten (10) Business Days; or

9.2 the Issuer or the Guarantor, as the case may be, defaults in the performance or observance of any of their respective other obligations under the Notes, the Trust Deed or in the Deed of Guarantee, as the case may be, and except where such default is not, in the opinion of the Trustee, capable of remedy, such default, in the opinion of the Trustee, remains unremedied for 30 days after written notice thereof, addressed to the Issuer, or where applicable the Guarantor, has been delivered by or on behalf of the Trustee to the Issuer or the Guarantor, as the case may be; or

9.3 a default under any Indebtedness of the Issuer, the Guarantor or any Material Subsidiary, if that default (i) is caused by a failure to pay any amounts due pursuant to such Indebtedness within any originally applicable grace period; or (ii) results in the acceleration of such Indebtedness prior to its Stated Maturity as a result of an event of default (howsoever described) under such Indebtedness; provided that the amount of Indebtedness referred to in sub-paragraph (i) and/or sub-paragraph (ii) above individually or in the aggregate exceeds U.S.$150,000,000, or the U.S. Dollar Equivalent thereof; or

9.4 the amount of unsatisfied judgments, decrees or orders of courts or dispute resolution bodies of competent jurisdiction that are not subject to further appeal for the payment of money against the Issuer, the Guarantor or any Material Subsidiary in the aggregate at any given moment of time exceeds U.S.$150,000,000 or the U.S. Dollar Equivalent thereof, except in circumstances where such judgment, decree or order, as the case may be, is being contested or appealed by the Issuer or Guarantor or any Material Subsidiary in good faith or is discharged within 60 days being made; or

9.5 the Issuer, the Guarantor or any Material Subsidiary is unable or admits in writing inability to pay its debts as they fall due to its creditors generally, generally suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with its creditors generally with a view to a general rescheduling of any of its Indebtedness in excess of U.S.$150,000,000 or the U.S. Dollar Equivalent thereof in aggregate; and/or a moratorium is declared in respect of any Indebtedness of any of the Issuer, the Guarantor or any Material Subsidiary as a result of any action taken by

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any competent authority where, in the case of any Material Subsidiary, such inability, action or declaration would have a Material Adverse Effect; or

9.6 the occurrence of any of the following events: (i) the Issuer, the Guarantor or any Material Subsidiary ceases to have corporate existence or is seeking or consenting to (or an order is made or an effective resolution is passed for) the introduction of proceedings for its liquidation or the appointment of a liquidator, or liquidation commission (likvidatsionnaya komissiya) or a similar officer of the Issuer, the Guarantor or any Material Subsidiary as the case may be or a petition in relation to the Issuer or any Material Subsidiary organised outside Russia, additionally, its winding up, examinership or dissolution (otherwise in each case than for the purposes of or pursuant to an amalgamation, reorganisation or restructuring whilst solvent or in accordance with Condition 4.2); (ii) the acceptance by a court of competent jurisdiction, arbitration court or any competent agency for review on its merits of a petition in respect of any of the Issuer, the Guarantor or any Material Subsidiary alleging, or for, its bankruptcy, insolvency, examinership, dissolution or liquidation (or any analogous proceedings) or the declaration by such court or agency of the insolvency or bankruptcy of any of the Issuer, the Guarantor or any Material Subsidiary under any bankruptcy or insolvency law (other than (a) any vexatious or frivolous petition; (b) any petition that is not accepted by such court or competent agency for review on its merits or is found to be without merit; (c) where such petition is presented or filed by a person that is not the Issuer, a Guarantor or a Subsidiary of the Issuer or a Guarantor, such petition has been discharged within 120 calendar days from the date on which the petition was accepted by a court of competent jurisdiction, arbitration court or any competent agency for review on its merits (excluding any period during which the court or competent agency has suspended the proceedings (including, without limitation, by way of deferral of acceptance (ostavleniye bez dvizheniya), dismissal (ostavleniye bez rassmotreniya), adjournment (pereryv v sudebnom zasedaniy), suspension (priostanovleniye sudebnogo proizvidstva) and postponement (otlozheniya sudebnogo razbiratelstva), as such terms are defined under applicable Russian laws)) or such longer period as the Trustee may consider appropriate, provided that the Trustee is satisfied that such petition is being contested in good faith and diligently; or (d) any petition for the purposes of or pursuant to an amalgamation, consolidation, merger, reorganisation, liquidation, dissolution, restructuring or analogous event whilst solvent or in accordance with Condition 4.2; and (e) in the case of a Material Subsidiary only, where it would not have a Material Adverse Effect); (iii) the institution, against the Guarantor or any Material Subsidiary organised within Russia of supervision (nablyudeniye), financial rehabilitation (finansovoye ozdorovleniye), external management (vneshneye upravleniye) or bankruptcy management (konkursnoye proizvodstvo), in each case, which is not discharged within 60 days and, in the case of a Material Subsidiary only, where it would have a Material Adverse Effect; or (iv) with respect to the Issuer or any Material Subsidiary organised outside Russia, the institution against the Issuer or any Material Subsidiary organised outside Russia of bankruptcy, examinership, insolvency, voluntary or judicial liquidation, composition with creditors, reprieve from payment, controlled management, fraudulent conveyance, general settlement with creditors or reorganisation and which, in the case of a Material Subsidiary only, would have a Material Adverse Effect; (v) the entry by the Issuer, the Guarantor or any Material Subsidiary into, or the agreeing by the Issuer, the Guarantor or any Material Subsidiary to enter into any amicable settlement which, in the case of any entity in the Russian Federation and without limitation, shall include amicable settlement (mirovoye - 258-

soglasheniye) with its creditors, as such terms are defined in the Federal Law of the Russian Federation No. 127-FZ "On Insolvency (Bankruptcy)" dated 26 October 2002 (as amended or replaced from time to time) and which, in the case of a Material Subsidiary only, would have a Material Adverse Effect; or (vi) any judicial liquidation in respect of the Issuer, the Guarantor or any Material Subsidiary (otherwise for the purposes of or pursuant to an amalgamation, reorganisation or restructuring whilst solvent or in accordance with Condition 4.2); or

9.7 any expropriation, attachment, sequestration, execution, Lien or distress is levied against or becomes enforceable and is enforced against, or an encumbrancer takes possession of or sells, the whole or (in the opinion of the Trustee) any material part of, the property, undertaking, revenues or assets of the Group taken as a whole, which, in each case, is not removed, satisfied, stayed, dismissed or otherwise discharged within 60 Business Days of its commencement;

9.8 the Notes, the Trust Deed or the Guarantee is held in any judicial or arbitral proceeding to be unenforceable or invalid or ceases to be legal, valid, binding and in full force and effect (other than in accordance with, the terms of such document) or the Issuer or the Guarantor denies, disaffirms, repudiates (or purports or evidences an intention to repudiate) its obligations under the Notes, the Trust Deed or the Guarantee; or

9.9 any step is taken by or under state authority with a view to the seizure, compulsory acquisition, expropriation, or nationalisation of all or (in the opinion of the Trustee) a material part of the undertaking, assets and revenues of the Issuer, the Guarantor or any Material Subsidiary and which, in the case of a Material Subsidiary only, would have a Material Adverse Effect; or

9.10 any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of the foregoing paragraphs.

To the extent that the Trustee is instructed or directed to take any action, step or proceeding pursuant to a request in writing by Noteholders holding not less than 25 per cent. of the principal amount of the Notes then outstanding or by an Extraordinary Resolution, and any such action, step or proceeding requires the determination of whether an event or occurrence has or would have a Material Adverse Effect, the Trustee shall have no duty to enquire or satisfy itself as to the existence of an event or occurrence having or that would have a Material Adverse Effect or not having or that would not have a Material Adverse Effect and shall be entitled to rely conclusively upon such instructions of such Noteholders regarding the same, and shall bear no liability of any nature whatsoever to the Issuer, the Guarantor or any Noteholder or any other person for acting upon such request, direction or Extraordinary Resolution.

10. Prescription

Claims for the payment of principal and interest in respect of any Note shall be prescribed unless made within 10 years (for claims for the payment of principal) or five years (for claims for the payment of interest) of the appropriate Relevant Date.

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11. Replacement of Definitive Notes

If any Note is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Registrar, subject to all applicable laws and Stock Exchange requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Registrar may reasonably require. Mutilated or defaced Notes must be surrendered before replacements will be issued.

12. Meetings of Noteholders, Modification, Waiver and Substitution

12.1 Meetings of Noteholders

The Trust Deed contains provisions for convening meetings of Noteholders to consider matters affecting their interests, including the sanctioning by Extraordinary Resolution of a modification to any of these Conditions or any provisions of the Trust Deed. Such meetings shall be held in accordance with the provisions set out in the Trust Deed. Such a meeting may be convened by the Issuer, the Guarantor or the Trustee and shall be convened by the Trustee upon the request in writing of Noteholders holding not less than 10 per cent of the aggregate principal amount of the Notes for the time being outstanding, subject in the case of the Trustee to it having been indemnified and/or secured and/or prefunded to its satisfaction. The quorum at any meeting convened to vote on an Extraordinary Resolution will be two or more persons holding or representing a clear majority in principal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the principal amount of the Notes held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to modify the maturity of the Notes or the dates on which interest is payable in respect of the Notes, (ii) to reduce or cancel the principal amount of, or interest payable on, the Notes, (iii) to alter the method of calculating the amount of any payment in respect of the Notes, (iv) to change the currency of payment under the Notes, (v) to modify the provisions in Schedule 4 of the Trust Deed concerning the quorum required at any meeting of Noteholders or the majority required to pass an Extraordinary Resolution, (vi) to modify or cancel the Guarantee, or (vii) to sanction the exchange or substitution for the Notes of, or the conversion of the Notes into, shares, bonds or other obligations or securities of the Issuer, the Guarantor or any other entity, in which case the necessary quorum will be two or more persons holding or representing not less than 75 per cent. of the aggregate principal amount of the Notes for the time being outstanding, or at any adjourned meeting not less than 25 per cent of the aggregate principal amount of the Notes for the time being outstanding. Any Extraordinary Resolution duly passed at any such meeting shall be binding on Noteholders (whether or not they were present at the meeting at which such resolution was passed). A written resolution signed by or on behalf of the Noteholders holding not less than 90 per cent of the aggregate principal amount of Notes outstanding who are for the time being entitled to receive notice of a meeting in accordance with the Trust Deed will take effect as if it were a duly passed Extraordinary Resolution. 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.

12.2 Modification and Waiver

The Trustee may agree with the Issuer and the Guarantor, without the consent of the Noteholders, to (i) any modification of any of the provisions of the Trust Deed, the Deed of Guarantee, the Agency Agreement or the Notes which is, in the opinion of the Trustee, of a formal, minor or technical nature or is made to correct a manifest error, and (ii) any - 260-

other modification (except as mentioned in the Trust Deed), which is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders. The Trustee may also waive or authorise, on such terms as seem expedient to it, any breach or proposed breach of any of the provisions of the Notes or the Trust Deed or the Deed of Guarantee or determine that a Potential Event of Default or an Event of Default will not be treated as such if, in the opinion of the Trustee, to do so would not be materially prejudicial to the interests of Noteholders, provided that the Trustee will not do so in contravention of an express direction given by an Extraordinary Resolution or a request made pursuant to Condition 9. Any such modification, authorisation or waiver shall be binding on the Noteholders and shall be notified to the Noteholders as soon as practicable in accordance with Condition 16.

12.3 Entitlement of the Trustee

In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise for individual Noteholders and the Trustee shall not be entitled to require, nor shall any Noteholder be entitled to claim, from the Issuer, the Guarantor, the Trustee or any other Person, any indemnification or payment in respect of any tax consequences of any such exercise upon individual Noteholders.

12.4 Substitution

The Trust Deed contains provisions permitting the Trustee to agree with the Issuer, subject to such amendment of the Trust Deed and such other conditions as the Trustee may reasonably require, but without the consent of the Noteholders, to the substitution of any other entity in place of the Issuer, or of any previous substituted company, as principal debtor under the Trust Deed and the Notes. Notice of any such substitution will be provided to the Noteholders as described in Condition 16 below.

13. Enforcement

At any time after the Notes become due and payable, the Trustee may, at its discretion (but subject to Condition 20) and without further notice, institute such proceedings or take such steps or actions against the Issuer and/or the Guarantor as it may think fit to enforce the terms of the Trust Deed, the Notes and/or the Deed of Guarantee, but it need not take any such steps, actions or proceedings and nor shall the Trustee be bound to take, or omit to take any step or action (including instituting such proceedings) unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Noteholders holding at least 25 per cent in principal amount of the Notes outstanding and (b) it shall have been indemnified and/or secured and/or prefunded to its satisfaction. No Noteholder may proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.

14. Indemnification and Removal of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer, the Guarantor and any entity related to the Issuer or the Guarantor without accounting for any profit. The Trustee may rely without liability to Noteholders on any certificate or report prepared by auditors, accountants or any other expert pursuant to the Trust Deed, whether or not addressed to the Trustee and whether or not the auditors', - 261-

accountants' or expert's liability in respect thereof is limited by a monetary cap or otherwise. 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.

15. Further Issues

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) and so that such further issue shall be consolidated and form a single series with the outstanding Notes. References in these Conditions to the Notes include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Notes. Any such other securities shall be constituted by a deed supplemental to the Trust Deed and will benefit from guarantee substantially in the form of the Deed of Guarantee given in respect of these Notes. The Trust Deed contains provisions for convening a single meeting of the Noteholders for the holders of securities of other series where the Trustee so decides.

16. Notices

Notices to the Noteholders shall be valid if sent to them by first class mail (airmail if overseas) at their respective addresses on the Register or by any means designated from time to time by any clearing system on which trades in Notes settle. Any such notice shall be deemed to have been given on the fourth day after the date of mailing. In addition, so long as the Notes are listed on the Stock Exchange and the rules or guidelines of that exchange so require, notices will be published via the companies announcements office of the Stock Exchange. 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 publication is made.

17. Currency Indemnity

If any sum due from the Issuer in respect of the Notes or the Guarantor in respect of the Guarantee or any order or judgment given or made in relation thereto has to be converted from the currency (the "first currency") in which the same is payable under these Conditions or such order or judgment into another currency (the "second currency") for the purpose of (a) making or filing a claim or proof against the Issuer or the Guarantor, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to the Notes or the Guarantee, the Issuer, failing whom the Guarantor, shall indemnify each recipient, on the written demand of such recipient addressed to the Issuer and the Guarantor and delivered to the Issuer and the Guarantor or to the specified office of the Registrar, against any loss suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which such recipient may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. This indemnity constitutes a separate and independent obligation of the Issuer or, as the case may be, the Guarantor and shall give rise to a separate and independent cause of action, will apply irrespective of any indulgence granted by any Noteholder or any other person and will continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect

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of any sum due under the Trust Deed, the Deed of Guarantee and/or the Notes or any other judgment or order.

18. Contracts (Rights of Third Parties) Act 1999

No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999 except and to the extent, if any, that the Notes expressly provide for such Act to apply to any of their terms.

19. Governing Law and Arbitration

19.1 The Trust Deed, the Notes, the Deed of Guarantee and these Conditions and any non- contractual obligations arising out of or in connection therewith shall be governed by and interpreted in accordance with English law.

19.2

19.2.1 Any dispute, claim or difference of whatever nature arising out of or in connection with the Trust Deed, the Notes, the Deed of Guarantee and these Conditions (including a dispute regarding the existence, validity or termination of the Trust Deed, the Notes, the Deed of Guarantee or these Conditions or a dispute relating to non-contractual obligations arising out of or in connection with the Trust Deed, the Notes, the Deed of Guarantee and these Conditions) (a "Dispute") shall be referred to and finally resolved by arbitration under the rules (the "Rules") of the London Court of International Arbitration (the "LCIA") (such arbitration to also be administered by the LCIA in accordance with the Rules), which Rules (with the exception of Articles 9A and 9B of the Rules, which the parties to the Trust Deed, the Notes, the Deed of Guarantee and these Conditions agree shall not apply) are deemed incorporated by reference into these Conditions, as amended herein.

19.2.2 The arbitral tribunal shall consist of three arbitrators. The claimant(s), irrespective of number, shall nominate jointly one arbitrator. The respondent(s), irrespective of number, shall nominate jointly the second arbitrator. The third arbitrator, who shall serve as Chairman, shall be nominated by agreement of the two party-nominated arbitrators. Failing such agreement within 15 days of the confirmation of the appointment of the second arbitrator, the third arbitrator shall be appointed by the LCIA as soon as possible. For the avoidance of doubt, the parties to this Agreement agree for the purpose of Article 8.1 of the Rules, that the claimant(s), irrespective of number, and the respondent(s), irrespective of number, shall constitute two separate sides for the formation of the arbitral tribunal.

19.2.3 In the event that the claimant(s) or the respondent(s) fail to nominate an arbitrator in accordance with the Rules within 30 days of receiving notice of the appointment of an arbitrator by the other party, such arbitrator shall be nominated by the LCIA as soon as possible, preferably within 15 days of such failure. In the event that the respondent(s) or both the claimant(s) and the respondent(s) fail to nominate an arbitrator in accordance with the Rules, all 3 arbitrators shall be nominated and appointed by the LCIA as soon as possible, preferably within 15 days of such failure, and such arbitrators shall then designate one amongst them as Chairman.

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19.2.4 The seat of arbitration shall be London, England and the language of the arbitration shall be English.

19.2.5 If more than one arbitration is commenced under the Trust Deed, the Notes, the Deed of Guarantee or these Conditions and any party contends that two or more such arbitrations are so closely connected that it is expedient for them to be resolved in one set of proceedings, the arbitral tribunal appointed in the first filed of such proceedings (the "First Tribunal") shall have the power to determine, provided no date for the hearing on the merits of the Dispute in any such arbitrations has been fixed, that the proceedings shall be consolidated.

19.2.6 The tribunal in such consolidated proceedings shall be selected as follows: (i) the parties to the consolidated proceedings shall agree on the composition of the tribunal; and (ii) failing such agreement within 30 days of consolidation being ordered by the First Tribunal, the LCIA shall appoint all members of the tribunal within 30 days of a written request by any of the parties to the consolidated proceedings.

19.2.7 For the avoidance of doubt, the parties to the Trust Deed, the Notes, the Deed of Guarantee and these Conditions are intended to have the right under the Contracts (Rights of Third Parties) Act 1999 to enforce the terms of Condition 19.2.6.

19.2.8 Each party to the Trust Deed and the Deed of Guarantee has agreed and each party to the Notes and these Conditions agrees that the arbitration and any facts, documents, awards or other information related to the arbitration or the dispute, controversy or claim to which it relates shall be kept strictly confidential and shall not be disclosed to any third party without the express written consent of the other party, unless such disclosure is required to comply with any law or regulation.

19.2.9 This Condition 19.2, including its validity and scope, shall be governed by and construed in accordance with English law.

19.3 Each of the Issuer and the Guarantor undertakes irrevocably to appoint Aquila International Services Limited of 2nd Floor, Berkeley Square House, Berkeley Square, London W1J 6BD as agent to accept service of process and any other documents in proceedings in England or in any legal action or proceedings arising out of or in connection with these Conditions and the Notes (the "Process Agent"), provided that:

19.3.1 service upon the Process Agent shall be deemed valid service upon the Issuer and the Guarantor whether or not the process is forwarded to or received by the Issuer or the Guarantor;

19.3.2 the Issuer and the Guarantor shall inform the Trustee, in writing, of any change in the address of the Process Agent within 28 days of such change;

19.3.3 if the Process Agent ceases to be able to act as a process agent or to have an address in England, the Issuer and the Guarantor irrevocably agrees to appoint a new process agent in England acceptable to the Trustee and to deliver to the trustee

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within 14 days a copy of a written acceptance of appointment by the new process agent; and

19.3.4 nothing in these Conditions shall affect the right to serve process in any other manner permitted by law.

19.4 To the extent that the Issuer or the Guarantor may now or hereafter be entitled, in any jurisdiction in which any legal action or proceeding may at any time be commenced pursuant to or in accordance with these Conditions, 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 these Conditions and/or to the extent that in any such jurisdiction there may be attributed to the Issuer or the Guarantor any such immunity (whether or not claimed), each of the Issuer and the Guarantor hereby irrevocably agrees not to claim, and hereby waive, any such immunity.

19.5 Each of the Issuer and the Guarantor irrevocably and generally consents in respect of any proceedings anywhere to the giving of any relief or the issue and service on it of any process in connection with those proceedings including, without limitation, the making, enforcement or execution against any assets whatsoever (irrespective of their use or intended use) of any order or judgment which may be made or given in those proceedings.

20. Non-Petition

None of the Noteholders or the other creditors (nor any other person acting on behalf of any of them) shall be entitled at any time to institute against the Issuer, or join in any institution against the Issuer of any bankruptcy, administration, moratorium, reorganisation, controlled management, arrangement, insolvency, examinership, winding- up or liquidation proceedings or similar insolvency proceedings under any applicable bankruptcy or similar law in connection with any obligation of the Issuer relating to the Notes or otherwise owed to the creditors, save for lodging a claim in the liquidation of the Issuer which is initiated by another party or taking proceedings to obtain a declaration or judgment as to the obligations of the Issuer.

No Noteholder shall have any recourse against any director or officer of the Issuer in respect of any obligations, covenants or agreement entered into or made by the Issuer in respect of the Notes, other than in the case of fraud.

21. Definitions

In these Conditions the following terms have the meaning given to them in this Condition 21.

"Affiliate" of any specified Person means (i) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person who is a director or officer (a) of such specified Person, (b) of any Subsidiary of such specified Person or (c) of any Person described in (i) above. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether - 265-

through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing;

"Authorised Officer" has the meaning given to it in the Trust Deed;

"Business Day" means, other than for the purposes of Condition 3.4 and Condition 7, a day on which, if on that day a payment is to be made hereunder, commercial banks generally are open for business in Moscow, New York City, Dublin and in the city where the Specified Office (as defined in the Agency Agreement) of the Principal Paying Agent is located;

"the Code" means the United States Internal Revenue Code of 1986, as amended;

"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;

"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended;

"Financial Statements" means, as the case may be (i) the Group's consolidated financial statements as at and for each financial year prepared in accordance with IFRS and (ii) the Group's consolidated interim condensed financial information for the first semi-annual period of each year of the Group prepared in accordance with IFRS;

"Group" means the Guarantor and its Subsidiaries taken as a whole;

"Group Total Assets" means at any date of determination the total assets of the Guarantor and its Subsidiaries as shown in the most recently published statement of financial position of the Group prepared in accordance with IFRS;

"guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of reimbursement agreements in respect thereof, of all or any part of any Indebtedness;

"IFRS" means International Financial Reporting Standards issued by the International Accounting Standards Board (the "IASB") and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB, consistently applied and which are in effect from time to time;

"Indebtedness" means, without duplication, in respect of the Guarantor and its Subsidiaries, any indebtedness for or in respect of:

(a) moneys borrowed (the principal amount of which as determined in accordance with IFRS);

(b) any principal amount (as determined in accordance with IFRS) raised by acceptance under any acceptance credit facility;

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(c) any principal amount (as determined in accordance with IFRS) raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d) any principal amount (as determined in accordance with IFRS) raised under any other transaction having the economic or commercial effect of a borrowing; and

(e) the amount of any liability in respect of the guarantee or indemnity for, or similar undertaking given in respect of, any of the items referred to above in relation to any Person which is not the Guarantor or its Subsidiary.

For the avoidance of doubt the following amounts shall not constitute "Indebtedness": (i) trade and other payables arising solely in the ordinary course of business; (ii) customer deposits and advance payments received from customers and prepayment facilities entered into with customers and having maturity not exceeding 365 days; (iii) any tax liability and any letters of credit and bank guarantees issued in relation to trade related activities, customs activities or tax payments; (iv) any liquidity support undertakings, debt service undertakings, equity support undertakings, guarantee by way of a pledge of the share capital of a Project Finance Company and similar arrangements provided by or on behalf of the Guarantor or a Subsidiary of the Guarantor in respect of Project Financing of a Project Finance Company; (v) Non-Recourse Debt of a Receivables Subsidiary in a Qualified Receivables Transaction; (vi) liabilities under any lease or hire purchase contracts, which would, in accordance with the IFRS in force immediately before the adoption of IFRS 16 (Leases), have been treated as operating leases; (vii) contingent liabilities other than with respect to items of Indebtedness described in the preceding sentence; (viii) non-financial guarantees (as determined in accordance with IFRS); (ix) liabilities in respect of the guarantee or indemnity for, or similar undertaking given in respect of, any of the items referred to in (i) to (viii) above by the Guarantor or its Subsidiary; and (x) any Indebtedness between the Guarantor and its Subsidiary or between Subsidiaries of the Guarantor;

"Issue Date" means 23 September 2019;

"Lien" means any mortgage, pledge, encumbrance, lien, charge or other security interest or other preferential agreement or agreement having a similar effect (including, without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction and any conditional sale or other title retention agreement or lease in the nature thereof);

"Material Adverse Effect" means a material adverse effect on (a) the operations or financial condition of the Group taken as a whole; (b) the Guarantor's, or the Issuer's, as the case may be, ability to perform or comply with its material obligations under the Notes, the Deed of Guarantee and the Trust Deed, as the case may be, and for the validity and enforceability thereof or the rights or remedies of the Noteholder or the Trustee in connection therewith;

"Material Subsidiary" means at any time, any other direct or indirect Subsidiary of the Guarantor:

(a) whose total assets represent not less than 10 per cent of Group Total Assets or whose total revenue represent not less than 10 per cent of total revenue of the Group

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(determined by reference to the most recent publicly available Financial Statements); or

(b) to which is transferred all or substantially all the assets and undertakings of a Subsidiary of the Guarantor which immediately prior to such transfer is a Material Subsidiary;

"Non-Recourse Debt" means Indebtedness:

(a) as to which neither the Guarantor nor any of its Subsidiaries (i) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) other than any liquidity support undertakings, debt service undertakings, equity support undertakings, guarantee by way of a pledge of the share capital of a Project Finance Company and similar arrangements provided by or on behalf of the Guarantor or a Subsidiary of the Guarantor in respect of Project Financing of a Project Finance Company which is not a Subsidiary of the Guarantor or (ii) is directly or indirectly liable (as a guarantor or otherwise);

(b) no default with respect to which would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Guarantor or any of its Subsidiaries to declare a default under such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated Maturity; and

(c) the explicit terms of which provide that there is no recourse against any of the assets of the Guarantor or any of its Subsidiaries, except for the share capital that the Guarantor or any of its Subsidiaries hold in a Project Finance Company;

"Officer's Certificate" means, a certificate executed on behalf of such person by an Authorised Officer of the Issuer or the Guarantor, as the case may be; provided that every Officer’s Certificate with respect to the compliance with the Trust Deed shall include (i) a statement that the Authorised Officer making or giving such Officer’s Certificate has read such condition and any definitions or other provisions contained in the Trust Deed relating thereto, (ii) a statement that, in the opinion of the Authorised Officer, he or she has made or has caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the Authorised Officer, such condition has been complied with;

"Permitted Liens" means:

(a) any Liens created or existing in respect of Domestic Relevant Indebtedness;

(b) any Liens:

(i) on property at the time the Guarantor or any of its Subsidiaries acquires the property, including any acquisition by means of a merger or consolidation with or into the Guarantor or any Subsidiary of the Guarantor; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such Person becoming a Subsidiary of the - 268-

Guarantor and provided further that such Liens may not extend to any other property owned by the Guarantor or a Subsidiary of the Guarantor; or

(ii) on property or share capital of a Person at the time such Person becomes a Subsidiary of the Guarantor; provided, however, that such Liens are not created, incurred or assumed in connection with, or in contemplation of, such Person becoming a Subsidiary of the Guarantor and provided further that such Liens may not extend to any other property owned by the Guarantor or a Subsidiary of the Guarantor;

(c) any Liens 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 (except a Subsidiary of the Guarantor) 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 Liens on the assets, undertaking, property or revenues of the Guarantor or any of its Subsidiaries 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 Lien on the assets, undertaking, property or revenues of the Guarantor or any of its Subsidiaries) does not exceed 20 per cent. of the Group Total Assets; and

(e) any Liens 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, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality;

"Potential Event of Default" means an event which, with the lapse of time and/or the issue, making or giving of any notice or both, would constitute an Event of Default;

"Project Finance Company" means any Person in which the Guarantor holds a direct or indirect interest, where such person is established for the purposes of undertaking the ownership, acquisition, construction or development of any project whose main source of finance is Project Financing;

"Project Financing" means any indebtedness issued, raised or borrowed by a Project Finance Company to finance the ownership, acquisition, construction or development of any project if the recourse of the person or persons providing such financing is limited to (a) the project financed and (b) the revenues derived from such project as the principal source of repayment for the moneys advanced, irrespective of there being any sponsor support undertakings including liquidity support undertakings, debt service undertakings, equity support undertakings, equity contribution agreements (and related guarantees), subordinated debt obligations, sponsor completion guarantees, input supply agreements, offtake agreements, equity pledges, indemnities or similar arrangements and undertakings;

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"Qualified Receivables Transaction" means any transaction or series of transactions entered into by the Guarantor or any of its Subsidiaries with any Person (including, without limitation, any Receivables Subsidiary) pursuant to which the Guarantor or any of its Subsidiaries (a) creates or permits to exist any Lien over, (b) sells, conveys or otherwise transfers or (c) grants a participation or beneficial interest in, its accounts receivable (whether now existing or arising in the future) of the Guarantor or any of its Subsidiaries and any assets related thereto (including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, the proceeds of such accounts receivable, and other assets which are customarily subject to the grant of a Lien, transferred or subject to the grant of a participation or beneficial interest, in connection with financing transactions involving accounts receivable);

"Receivables Subsidiary" means a Subsidiary of the Guarantor which engages in no activities other than in connection with the financing of accounts receivable and which is designated by the board of directors of the Guarantor (as provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Guarantor or any Subsidiary of the Guarantor (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities given or entered into (as the case may be) by the Guarantor or such Subsidiary in the ordinary course of business of the Group in connection with a Qualified Receivables Transaction) and excluding guarantees by any other Receivables Subsidiary, (ii) provides recourse to or obligates the Guarantor or any subsidiary of the Guarantor in any way other than pursuant to representations, warranties, covenants and indemnities given or entered into (as the case may be) in the ordinary course of business of the Group in connection with a Qualified Receivables Transaction, or (iii) subjects any property or asset of the Guarantor or any Subsidiary of the Guarantor (other than accounts receivable and related assets as provided in the definition of Qualified Receivables Transaction), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to representations, warranties, covenants and indemnities given or entered into (as the case may be) in the ordinary course of business of the Group in connection with a Qualified Receivables Transaction, (b) with which neither the Guarantor nor any Subsidiary of the Guarantor has any material contract, agreement, arrangement or understanding other than on terms no less favourable to the Guarantor or such Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Guarantor, other than fees payable in the ordinary course of business of the Group in connection with servicing accounts receivable, and (c) with which neither the Guarantor nor any Subsidiary of the Guarantor has any obligation to maintain or preserve such Subsidiary's financial condition or cause such Subsidiary to achieve certain levels of operating results. Any such designation by the board of directors of the Guarantor will be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the board of directors of the Guarantor giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions. The Trustee shall be entitled to rely on such certificate without further enquiries or liability to any person nor inquire further as regards the circumstances then existing;

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"Relevant Indebtedness" means any:

(a) Indebtedness in the form of or represented by any bond, note, debenture stock, loan stock, certificate or other debt instrument (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, credit agreements or similar facilities) which is, or is capable of becoming, quoted, listed or ordinarily dealt in or traded on any stock exchange or any public or institutional securities market (including, without limitation, any over-the-counter market); or

(b) Indebtedness in the form of a loan to the Issuer, the Guarantor or any Material Subsidiary of the Guarantor which is financed by the issuance of any of the foregoing forms of debt in (a) above, where such issuance is by a special purpose company or a bank and the rights to payment of the holders of such forms of debt are limited to payments actually made by either the Issuer, the Guarantor or such Material Subsidiary pursuant to such loan;

"Relevant Jurisdiction" means:

(a) in the case of payment by the Issuer, Ireland or any political subdivision or any authority thereof or therein having power to tax;

(b) in the case of payments by the Guarantor, the Russian Federation or any political subdivision or any authority thereof or therein having power to tax; or

(c) in any case except in relation to Condition 6.2, any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax to which the Issuer or the Guarantor becomes subject in respect of payments made by it of principal or interest on the Notes or under the Guarantee;

"Roubles" means the lawful currency of the Russian Federation for the time being;

"Securities Act" means the U.S. Securities Act of 1933, as amended;

"Stated Maturity" means, with respect to any Indebtedness, the date specified in such Indebtedness as the fixed date on which the final payment of principal of such Indebtedness is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such Indebtedness at the option of the holder or lender thereof upon the happening of any contingency unless such contingency has occurred);

"Stock Exchange" means the Irish Stock Exchange plc trading as Euronext Dublin;

"Subsidiary" of any specified Person means any corporation, partnership, joint venture, association or other business or entity, whether existing on the Issue Date or thereafter organised or acquired:

(a) which is controlled directly or indirectly by such Person; and/or

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(b) which is beneficially owned directly or indirectly for more than 50 per cent of the issued share capital or similar right of ownership by such Person; and/or

(c) of which more than 50 per cent of the total voting power of the voting stock is held by such Person and/or any Subsidiaries of such Person; and which in each case is required under IFRS to be consolidated in the financial statements of such Person prepared in accordance with IFRS;

"Taxes" means any taxes, duties, assessments or government charges of whatever nature (including interest or penalties thereon) which are now or at any time hereafter imposed, assessed, charged, levied, collected, demanded, withheld or claimed by a Relevant Jurisdiction or any tax authority thereof or therein and the term "Taxation" shall be construed accordingly;

"Treasury Shares" means any shares in the share capital of the Guarantor or any Subsidiary of the Group as may be owned by the Guarantor or such Subsidiary of the Guarantor; and

"U.S. Dollar Equivalent" means at any time with respect to any monetary amount (i) denominated in Roubles, the amount of U.S. dollars obtained by converting such Rouble amount into U.S. dollars at the spot rate for the purchase of U.S. dollars as published by the Central Bank of Russia on the date two Business Days prior to such determination; or (ii) denominated in any other currency other than U.S. dollars, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The Wall Street Journal in the "Exchange Rates" column under the heading "Currency Trading" or any replacement thereof on the date two Business Days prior to such determination.

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SUMMARY OF PROVISIONS OF THE NOTES WHILE IN GLOBAL FORM

The Global Notes

All Notes will be in fully registered form, without interest coupons attached. The Notes offered and sold outside the United States in reliance on Regulation S (the "Regulation S Notes") will be evidenced on issue by, and represented by beneficial interests in, the Regulation S Global Note (the "Regulation S Global Notes"). The Regulation S Global Note will be in fully registered form, without interest coupons attached, and will be deposited on or about the Issue Date with a common depositary for Euroclear Bank and Clearstream, Luxembourg, and registered in the name of a nominee for such common depositary in respect of interests held through Euroclear or Clearstream, Luxembourg. Beneficial interests in the Regulation S Global Note may at all times be held only through Euroclear or Clearstream, Luxembourg. By acquisition of a beneficial interest in the Regulation S Global Note, the purchaser thereof will be deemed to represent, among other things, that it will transfer such interest only (a) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (b) to a person whom the seller reasonably believes to be a person who takes delivery in the form of an interest in a Rule 144A Global Note (if applicable). See "Transfer Restrictions, Clearing and Settlement".

The Notes offered and sold in reliance on Rule 144A (the "Rule 144A Notes") will be evidenced on issue by, and represented by beneficial interests in, a Rule 144A Global Note (the "Rule 144A Global Note" and, together with the Regulation S Global Note, the "Global Notes"). The Rule 144A Global Note will be in fully registered form, without interest coupons attached, and will be deposited on or about the Issue Date with a custodian for, and registered in the name of Cede & Co., as nominee for, DTC. By acquisition of a beneficial interest in the Rule 144A Global Note, the purchaser thereof will be deemed to represent, among other things, that the purchaser 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. Beneficial interests in the Rule 144A Global Note may be held only through DTC.

Each Regulation S Global Note will have an ISIN and a common code and each Rule 144A Global Note will have a CUSIP number, an ISIN and a common code.

Amendments to Conditions

The Global Notes contain provisions which apply to the Notes in respect of which the Global Notes are issued, some of which modify the effect of the Terms and Conditions. Terms defined in the Terms and Conditions have the same meanings as in the paragraphs below. The following are those provisions.

Meetings

The registered holder of each Global Note 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 Note for which a Global Note is exchangeable.

Cancellation

Cancellation of any Note evidenced by a Global Note required by the Terms and Conditions to be cancelled will be effected by reduction in the principal amount of the appropriate Global Note.

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Payment

Payments of principal and interest in respect of the Global Note shall be made to the person who appears at the relevant time on the Register of Noteholders as holder of the Global Note 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 on the relevant schedule thereto (such endorsement being prima facie evidence that the payment in question has been made).

Notwithstanding Condition 7.5, "Record Date" shall mean the Clearing System Business Day immediate prior to the relevant due date for payments and the "Clearing System Business Day" means Monday to Friday inclusive, except 25 December and 1 January. For the purposes of payments made in respect of a Global Note, the relevant place of presentation shall be disregarded in the definition of "business day" set out in Condition 7.4. No person shall, however, be entitled to receive any payment on a Global Note falling due after the Exchange Date (as defined below) unless the exchange of the relevant Global Note for Definitive Notes is improperly withheld or refused by or on behalf of the Issuer.

Issuer's Option

Any option of the Issuer provided for in the Conditions while the Notes are represented by a Global Note 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 or any other clearing system (as the case may be).

Transfers

Transfer of interests in the Notes which are represented by a Global Note shall be made in accordance with the rules and procedures of Euroclear, Clearstream, Luxembourg or DTC, as the case may be.

Notices

So long as any of the Notes are represented by a Global Note and such Global Note is held on behalf of DTC, Euroclear or Clearstream, Luxembourg, or any alternative clearing system, notices to Noteholders may be given by delivery of the relevant notice to DTC, Euroclear or Clearstream, Luxembourg, or any alternative clearing system, for communication by it to entitled accountholders in substitution for notification as required by the Terms and Conditions, and such notices shall be deemed to have been given on the second day after the day on which they were so delivered. For so long as the Notes are listed, the Issuer will also publish notices in accordance with the rules and regulations of the relevant stock exchange.

Whilst any Notes held by a Noteholder are represented by a Global Note, notices to be given by such Noteholder may be given by such Noteholder to the Principal Paying Agent through the relevant clearing system in such a manner as the Principal Paying Agent and the relevant clearing system may approve for this purpose.

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Prescription

Claims in respect of principal, interest and other amounts payable in respect of the Notes will become void unless they are 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.

Trustee's Powers

In considering the interests of Noteholders in circumstances where the Global Notes are being held on behalf of DTC, Euroclear or Clearstream, Luxembourg or any alternative clearing system, the Trustee may, to the extent it considers it appropriate to do so in the circumstances: (a) have regard to such information provided to it by or on behalf of the relevant clearing system or its operator as to the identity of its accountholders (either individually or by way of category) with entitlements in respect of Global Notes; and (b) consider such interests as if such accountholders were the holders of such Global Notes.

Electronic Consent and Written Resolution

While any Global Note is registered in the name of any nominee for a clearing system, then:

(a) approval of a resolution proposed by the Issuer, the Guarantor or the Trustee (as the case may be) given by way of electronic consents communicated through the electronic communications systems of the relevant clearing system(s) in accordance with their operating rules and procedures by or on behalf of not less than 90% in nominal amount of the Notes outstanding (an "Electronic Consent" as defined in the Trust Deed) shall, for all purposes (including matters that would otherwise require an Extraordinary Resolution to be passed at a meeting for which the special quorum was satisfied), take effect as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held, and shall be binding on all Noteholders whether or not they participated in such Electronic Consent; and

(b) where Electronic Consent is not being sought, for the purpose of determining whether a Written Resolution has been validly passed, the Issuer, the Guarantor and the Trustee shall be entitled to rely on consent or instructions given in writing directly to the Issuer, the Guarantor and/or the Trustee, as the case may be, (a) by accountholders in the clearing system with entitlements to such Global Note; and/or, (b) where the accountholders hold any such entitlement on behalf of another person, on written consent from or written instruction by the person identified by that accountholder as the person for whom such entitlement is held. For the purpose of establishing the entitlement to give any such consent or instruction, the Issuer, the Guarantors and the Trustee shall be entitled to rely on any certificate or other document issued by Euroclear, Clearstream, Luxembourg or any other relevant clearing system, or issued by an accountholder of them or an intermediary in a holding chain, in relation to the holding of interests in the Notes. Any resolution passed in such manner shall be binding on all Noteholders, even if the relevant consent or instruction proves to be defective. Any such certificate or other document shall be conclusive and binding for all purposes. Any such certificate or other document may comprise any form of statement or print-out of electronic records provided by the relevant clearing system (including Euroclear's EUCLID or Clearstream, Luxembourg's CreationOnline system) in accordance with its usual procedures and in which the accountholder of a particular

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principal or nominal amount of the Notes is clearly identified together with the amount of such holding. None of the Issuer, the Guarantors and the Trustee shall be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by any such person and subsequently found to be forged or not authentic. A Written Resolution and/or Electronic Consent shall take effect as an Extraordinary Resolution. A Written Resolution and/or Electronic Consent will be binding on all Noteholders, whether or not they participated in such Written Resolution and/or Electronic Consent.

Exchange of Interests in Global Notes for Definitive Notes

Exchange of interests in Notes represented by the Rule 144A Global Note, in whole but not in part, for Rule 144A Notes represented by individual Notes in definitive form (the "Rule 144A Definitive Notes") will not be permitted unless DTC or a successor depositary notifies the Issuer that it is no longer willing or able to discharge properly its responsibilities as depositary with respect to the Rule 144A Global Note or ceases to be a "clearing agency" registered under the Exchange Act, or is at any time no longer eligible to act as such, and the Issuer is unable to locate a qualified successor within 90 days of receiving notice of such ineligibility or cessation on the part of such depositary. Exchange of interests in Notes represented by the Regulation S Global Note, in whole but not in part, for Regulation S Notes represented by individual Notes in definitive form (the "Regulation S Definitive Notes" and, together with the Rule 144A Definitive Notes, the "Definitive Notes") will not be permitted unless Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of legal holidays), or announces an intention permanently to cease business or does in fact do so. Exchange of interests in a Global Note, in whole or in part, for a Definitive Note may be made on or after the Exchange Date by the surrender by the holder of the Global Note to the Registrar or the Transfer Agent. "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 or relevant Transfer Agent is located.

Legends

The holder of a Definitive Note 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 Note bearing the legend referred to under "Transfer Restrictions, Clearing and Settlement" or upon specific request for removal of the legend on a Rule 144A Definitive Note, the Issuer will deliver only Rule 144A Definitive Notes that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Registrar a fully completed, signed certificate substantially to the effect that the transfer is being made in compliance with the provisions of Regulation S.

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TRANSFER RESTRICTIONS, CLEARING AND SETTLEMENT

The following information relates to the transfer of the Notes. Terms defined in this section of the Prospectus have the same meanings in the paragraphs below.

Transfer Restrictions

Rule 144A Notes

Each purchaser of Rule 144A Notes within the United States pursuant to Rule 144A, by accepting delivery of this Prospectus, will be deemed to have represented, agreed and acknowledged that:

1. It is (a) a QIB, (b) acquiring such Notes for its own account, or for the account of one or more QIBs and (c) aware, and each beneficial owner of such Notes has been advised, that the sale of such Notes to it is being made in reliance on Rule 144A.

2. The Securities have not been and will not be registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except: (a) pursuant to a registration statement that has been declared effective under the Securities Act; (b) in reliance on Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of one or more QIBs; (c) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S; or (d) pursuant to any other available exemption from the registration requirements of the Securities Act, in each case in accordance with any applicable securities laws of any State of the United States.

3. The Notes offered and sold hereby in the manner set forth in paragraph (1) are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, are being offered and sold in a transaction not involving any public offering in the United States within the meaning of the Securities Act and no representation is made as to the availability of the exemption provided by Rule 144 for the resale of the Notes.

4. The Rule 144A Notes, unless the Issuer determines otherwise in compliance with applicable law, will bear a legend substantially to the following effect:

THIS NOTE AND THE GUARANTEE IN RESPECT HEREOF HAS 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 THIS NOTE 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 BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB") THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QIBS, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO

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REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THE NOTES.

5. It understands that the Issuer, the Guarantor, the Registrar, the Global Coordinators, the Joint Lead Managers and their respective affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements. If it is acquiring any Notes for the account of one or more QIBs, it represents that it has sole investment discretion with respect to each of those accounts and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each account.

6. It understands that the Rule 144A Notes will be evidenced by the Rule 144A Global Note. Before any interest in the Rule 144A Global Notes 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, it will be required to provide the Transfer Agent with a written certification (in the form provided in the 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.

Book-Entry Procedures for the Global Notes

Custodial and depository links are to be established between DTC, Euroclear and Clearstream, Luxembourg to facilitate the initial issue of the Notes and cross-market transfers of the Notes associated with secondary market trading. See "— Book-Entry Ownership" and "— Settlement and Transfer of Notes". Investors may hold their interests in the Global Notes directly through DTC, 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.

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.

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 organisation" 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 - 278-

provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its Participants and facilitate the clearance and settlement of securities transactions between Participants through electronic computerised book-entry changes in accounts of its Participants, thereby eliminating the need for physical movement of certificates.

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 Direct Participant, either directly or indirectly.

Investors may hold their interests in the Rule 144A Global Note directly through DTC if they are Direct Participants in the DTC system, or as Indirect Participants through organisations which are Direct 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 Direct Participants and only in respect of such portion of the aggregate principal amount of the Rule 144A Global Note as to which such Participant or Participants has or have given such direction. However, in the circumstances described under "Summary of Provisions of the Notes while in Global Form — Exchange of Interests in Global Notes for Definitive Notes", DTC will surrender the Rule 144A Global Note for exchange for Rule 144A Definitive Notes (which will bear the legend applicable to transfers pursuant to Rule 144A).

Book-Entry Ownership

Euroclear and Clearstream, Luxembourg

The Regulation S Global Note representing the Regulation S Notes will have an ISIN, a Common Code and a CUSIP number 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-2967, Luxembourg.

DTC

The Rule 144A Global Note representing the Rule 144A Notes will have an ISIN, a Common Code and a CUSIP number and will be deposited with a custodian (the "Custodian") for, and registered in the name of Cede & Co. as 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 DTC, Euroclear, Clearstream, Luxembourg as the holder of a Note evidenced by a Global Note must look solely to DTC, Euroclear or Clearstream, Luxembourg (as the case may be) for his share of each payment made by the Issuer to the holder of such Global Note and in relation to all other rights arising under such Global Note, subject to and in accordance with the respective rules and procedures of DTC, Euroclear or Clearstream, Luxembourg (as the case may be). The Issuer expects that, upon receipt of any payment in respect of Notes evidenced by a Global Note, the Principal Paying Agent shall pay DTC, Euroclear and/or Clearstream (as applicable), who 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 as shown on the records of the relevant common depositary or its nominee. The Issuer also expects that - 279-

payments by Direct Participants in any clearing system to owners of beneficial interests in any Global Note held through such Direct Participants in any clearing system will be governed by standing instructions and customary practices. Save as aforesaid, such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are evidenced by such Global Note, and the obligations of the Issuer will be discharged by payment to the registered holder, as the case may be, of such Global Note in respect of each amount so paid. None of the Issuer, the Guarantor, the Trustee, the Global Coordinators or the Joint Lead Managers 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 or for maintaining, supervising or reviewing any records relating to such ownership interests.

Settlement and Transfer of Notes

So long as DTC or its nominee or Euroclear, Clearstream, Luxembourg or the nominee of their common depositary is the registered holder of a Global Note, DTC, Euroclear, Clearstream, Luxembourg or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under the Agency Agreement and the Notes. Payments of principal, premium (if any), interest and additional amounts (if any) in respect of Global Notes will be made to DTC, Euroclear, Clearstream, Luxembourg or to, or to the order of, such nominee, as the case may be, as the registered holder thereof. None of the Issuer, the Guarantor, the Trustee, any Agent, the Global Coordinators or the Joint Lead Managers or any affiliate of any of them or any person by whom any of them is controlled for the purposes of the Securities Act will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Distributions of principal, premium (if any) and interest with respect to book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by Euroclear or Clearstream, Luxembourg, from the Principal Paying Agent, to the cash accounts of Euroclear or Clearstream, Luxembourg customers in accordance with the relevant system's rules and procedures.

Holders of book-entry interests in the Notes through DTC will receive, to the extent received by DTC from the Principal Paying Agent, all distributions of principal, premium (if any) and interest with respect to book entry interests in the Notes from the Principal Paying Agent through DTC. Distribution in the United States will be subject to relevant United States tax laws and regulations.

Payments on the Notes will be paid to the holder shown on the Register on the close of business the business day before the due date for such payment so long as the Notes are represented by a Global Note, and on the close of business the Clearing System Business Day before the due date for such payment if the Notes are in the form of Definitive Notes (the "Record Date").

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

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

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Transfers of ownership interests in Notes held within the clearing system will be effected by entries made on the books of Participants 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 held within a clearing system are exchanged for Definitive Notes.

No clearing system has knowledge of the actual Beneficial Owners of the Notes held within such clearing system, and its records will reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by the clearing systems to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants 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 require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer interests in a Global Note to such persons may be limited. Because DTC, Euroclear and Clearstream, Luxembourg can only act on behalf of indirect participants, the ability of a person having an interest in a Global Note to pledge such interest to persons or entities which do not participate in the relevant clearing system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate in respect of such interest.

The holdings of book-entry interests in the Notes through DTC, Euroclear and Clearstream, Luxembourg will be reflected in the book-entry accounts of each such institution. As necessary, the Registrar will adjust the amounts of Notes on the Register for the accounts of (i) the nominee of the common depositary and (ii) Cede & Co. to reflect the amounts of Notes held through Euroclear, Clearstream, Luxembourg, and DTC, respectively. Beneficial ownership in the Notes will be held through financial institutions as direct and indirect participants in DTC, Euroclear and Clearstream, Luxembourg.

Beneficial interests in the Regulation S Global Note and the Rule 144A Global Note will be in uncertificated book-entry form.

DTC actions with respect to the Notes

The Issuer will direct DTC to take the following steps in connection with the Notes:

• to cause (i) each physical DTC delivery order ticket delivered by DTC to purchasers to contain the 20-character security descriptors and (ii) each DTC delivery order ticket delivered by DTC to purchasers in electronic form to contain the "GRLS" indicators and the related user manual for participants, which will contain a description of relevant restrictions;

• to send, on or prior to the Issue Date, an "Important Notice" to all DTC participants in connection with this Offering of the Notes. The Issuer may instruct DTC from time to time (but not more frequently than every six months) to reissue the "Important Notice";

• to include in all "confirms" of trades of the Notes in DTC, CUSIP numbers with a "fixed field" attached to the CUSIP number that has the "GRLS" markers; and

• to deliver to the Issuer from time to time a list of all DTC participants holding an interest in the Notes. - 281-

Euroclear actions with respect to the Notes

The Issuer will instruct Euroclear Bank SA/NV to take the following steps in connection with the Notes:

• to reference "144A" as part of the security name in the Euroclear securities database;

• in each daily securities balances report and daily transactions report to Euroclear participants holding positions in the Notes, to include "144A" in the securities name for the Notes; and

• to deliver to the Issuer from time to time, upon its request, a list of all Euroclear participants holding an interest in the Notes.

Clearstream, Luxembourg, actions with respect to the Notes

The Issuer will instruct Clearstream, Luxembourg, to take the following steps in connection with the Notes:

• to reference "144A" as part of the security name in the Clearstream, Luxembourg, securities database;

• in each daily portfolio report and daily settlement report to Clearstream, Luxembourg, participants holding positions in the Notes, to include "144A" in the securities name for the Notes; and

• to deliver to the Issuer from time to time, upon its request, a list of all Clearstream, Luxembourg, participants holding an interest in the Notes.

Bloomberg Screens, etc.

The Issuer will from time to time request all third-party vendors to include appropriate legends regarding Rule 144A restrictions on the Notes on screens maintained by such vendors. Without limiting the foregoing, the Global Coordinators and the Joint Lead Managers will request that Bloomberg, L.P. include the following on each Bloomberg screen containing information about the securities as applicable:

• the bottom of the "Security Display" page describing the Notes should state: "Iss'd under 144A" and "GRLS";

• the "Security Display" page should have a flashing red indicator stating "Additional Note Pg";

• such indicator for the Notes should link to an "Additional Security Information" page, which should state that the Notes "are being offered in reliance on the exception from registration under Rule 144A of the Securities Act of 1933, as amended (the "Securities Act") to persons that are "qualified institutional buyers" as defined in Rule 144A under the Securities Act; and

• the "Disclaimer" pages for the Notes should state that the securities "have not been and will not be registered under the Securities Act of 1933, as amended". - 282-

CUSIP

Each "CUSIP" obtained for a Rule 144A Global Note will have an attached "fixed field" that contains "GRLS" and "144A" indicators.

Trading between Euroclear and Clearstream, Luxembourg Accountholders

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 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 United States corporate debt obligations in DTC's Same Day Funds Settlement System.

Trading between DTC Seller and Euroclear or 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 a Rule 144A Global Note to the account of a Euroclear or Clearstream, Luxembourg accountholder wishing to purchase a beneficial interest in the Regulation S Global Note (subject to such certification procedures as are provided in the Agency Agreement), the DTC participant will deliver instructions for delivery to the relevant Euroclear or Clearstream, Luxembourg accountholder to DTC by 12:00 noon, New York time, 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 custodian will instruct the Registrar to (i) decrease the amount of Notes registered in the name of Cede & Co. and evidenced by such Rule 144A Global Note and (ii) increase the amount of Notes registered in the name of a nominee of the common depositary and evidenced by such Regulation S Global Note. 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. See above concerning the Record Date for payments of interest.

Trading between Euroclear or Clearstream, Luxembourg Seller and DTC Purchaser

When book-entry interests in Notes are to be transferred from the account of a Euroclear or Clearstream, Luxembourg accountholder holding a beneficial interest in a Regulation S Global Note to the account of a DTC participant wishing to purchase a beneficial interest in a Rule 144A Global Note (subject to such certification procedures as are provided in the Agency Agreement), the Euroclear or Clearstream, Luxembourg accountholder 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 depositary 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 (i) transmit appropriate instructions to the custodian who will in turn deliver such book-entry

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interests in the Notes free of payment to the relevant account of the DTC participant and (ii) instruct the Registrar to (a) decrease the amount of Notes registered in the name of a nominee of the common depositary and evidenced by such Regulation S Global Note and (b) increase the amount of Notes registered in the name of the Cede & Co. and evidenced by such Rule 144A Global Note. See above concerning the Record Date for payments of interest.

Although the foregoing sets out the procedures of DTC, Euroclear and Clearstream, Luxembourg in order to facilitate the transfers of interests in the Notes among the participants of DTC, Euroclear and Clearstream, Luxembourg, none of DTC, Euroclear or Clearstream, Luxembourg is under any obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Issuer, the Guarantor, the Trustee, any Agent, the Global Coordinators and the Joint Lead Managers, or any affiliate of any of them or any person by whom any of them is controlled for the purposes of the Securities Act, will have any responsibility for the performance by DTC, Euroclear or Clearstream, Luxembourg or their respective direct or indirect participants or accountholders of their respective obligations under the rules and procedures governing their operations or for the sufficiency for any purpose of the arrangements described above.

Pre-issue Trades Settlement

It is expected that delivery of the Notes will be made against payment therefor on the Issue Date, which could be more than three business days following the date of pricing. Under Rule 15c6-1 under the Exchange Act, trades in the United States secondary market generally are required to settle within two business days (T+2), unless the parties to any such trade expressly agree otherwise.

Accordingly, purchasers who wish to trade the Notes in the United States on the date of pricing or the next succeeding business days until three days prior to the Issue Date will be required, by virtue of the fact the Notes initially will settle beyond T+2, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Settlement procedures in other countries will vary.

Purchasers of the Notes may be affected by such local settlement practices, and purchasers of the Notes between the relevant date of pricing and the Issue Date should consult their own advisers.

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TAX CONSIDERATIONS

THE RUSSIAN FEDERATION

The following is a general description of certain tax laws relating to the Notes and does not purport to be a comprehensive discussion of the tax treatment of the Notes. Prospective investors in the Notes should consult their own tax advisors as to the tax consequences of the purchase, ownership and disposition of the Notes in light of their particular circumstances, including but not limited to the consequences of receipt of interest and sale or redemption 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 payments under the Guarantee. The overview is based on the laws of the Russian Federation in effect on the dates of this Prospectus, which are subject to potential change (possibly with retroactive effect). This 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 taxation treaty relief in respect of income payable on the Notes, or practical difficulties connected with claiming such double taxation 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 of investing in, owning or disposing of the Notes 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) a Noteholder which is a legal entity or an organisation and is:

(i) a Russian legal entity;

(ii) a foreign legal entity or organisation recognised as a Russian tax resident based on the Russian Tax Code;

(iii) a foreign legal entity or organisation recognised as a Russian tax resident based on the provisions of an applicable double taxation treaty (for the purposes of application of such double taxation treaty);

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(iv) a foreign legal entity or organisation which holds and/or disposes of the Notes through its permanent establishment in the Russian Federation (a "Legal Entity Resident Noteholder"); and

(b) an Individual Noteholder and is actually present in Russia in total 183 calendar days or more in any period comprising 12 consecutive months (an "Individual Resident Noteholder"). Presence in the Russian Federation is not considered interrupted if an individual departs for short periods (less than six months) from the Russian Federation for medical treatment or education purposes as well as for the employment or other duties related to the performance of works (services) on offshore hydrocarbon 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 spent in the Russian Federation 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 the Russian Federation in such calendar year.

For the purposes of this overview, the term "Non-Resident Noteholder" means any Noteholder (including any individual (the "Individual Non-Resident Noteholder") and any legal entity or an organisation (the "Legal Entity Non-Resident Noteholder")) that does not qualify as a Resident Noteholder.

The Russian tax treatment of payments under the Guarantee made by SIBUR to the Trustee under the Trust Deed may affect the holders of the Notes. See "— Taxation of Payments under the Guarantee made by SIBUR" below.

Taxation 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 Entity Resident Noteholders

A Legal Entity Resident Noteholder 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, Legal Entity Resident Noteholders are required to submit Russian profits tax returns, and assess and pay tax on capital gains and interest (coupon) income.

Individual Resident Noteholders

An Individual Resident Noteholder 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 an Individual Resident Noteholder 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 tax agent. For the purposes of taxation of interest (coupon) income and income received from a sale,

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redemption and/or other disposal of the Notes, a tax agent is inter alia a licensed broker or an asset manager who carries out operations in the interest of an Individual Resident Noteholder under an asset management agreement, a brokerage service agreement, an agency agreement or a commission agreement, or in certain cases a Russian organisation (e.g. the Issuer), which makes payments under the notes. If the Russian personal income tax has not been withheld (if there was no tax agent) Individual Resident Noteholders are required to submit annual personal income tax returns, assess and pay the tax. If the tax agent in Russia was not able to withhold the tax and reported this fact to the Russian tax authorities, the tax is payable by the Individual Resident Noteholder based on a tax assessment issued by the Russian tax authorities.

Legal Entity Non-Resident Noteholders

Acquisition of the Notes

The acquisition of the Notes by a Legal Entity Non-Resident Noteholder (whether upon issuance or in the secondary market) should not constitute a taxable event under Russian tax law. Consequently, the acquisition of the Notes should not trigger any Russian tax implications for the Legal Entity Non-Resident Noteholder.

Disposal of the Notes

Generally, there should be no Russian tax on gains from sale or other disposition of the Notes imposed on a Legal Entity Non-Resident Noteholder. There is some uncertainty regarding the tax treatment of the portion of the sales or disposal proceeds, if any, attributable to accrued interest (coupon) on the bonds (i.e. debt obligations) where proceeds from sale or other disposition of the Notes are received from a source within Russia by a Legal Entity Non-Resident Noteholder, 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 Russian Ministry of Finance in its 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 even if the sale, redemption of disposal itself results in a capital loss, subject to the provisions outlined in section "— Taxation of Payments under the Guarantee made by SIBUR — Double Taxation Treaty Relief".

Legal Entity Non-Resident Noteholders 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 the Russian Federation in respect of a sale, redemption or other disposal of the Notes and applicability of double taxation treaty relief.

Individual Non-Resident Noteholders

Acquisition of the Notes

The taxation of income of Individual Non-Resident Noteholders will depend on whether the income is characterised as received from a Russian or non-Russian source. In certain circumstances, the acquisition of the Notes by Individual Non-Resident Noteholders (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 Individual Non-Resident

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Noteholders acquire the Notes in the Russian Federation or from a Russian entity 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), this may constitute a taxable event pursuant to the provisions of the Russian Tax Code relating to material benefit (deemed income) received by individuals as a result of acquiring securities. 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 as Russian-source income if the Notes are purchased "in the Russian Federation". In the absence of any additional guidance as to what should be considered as a purchase of securities in the Russian Federation, the Russian tax authorities may apply various criteria, including looking at the place of conclusion of the acquisition transaction, the location of the seller, or other similar criteria. In such a case, Individual Non-Resident Noteholders may be subject to the Russian personal income tax rate of 30% on an amount equal to the difference between the fair market value (calculated under the Russian Tax Code) and the purchase price of the Notes.

The tax may be withheld at source of payment or, if the tax is not withheld, the Individual Non- Resident Noteholder may be required to declare its income in the Russian Federation by filing a tax return and pay the tax.

Disposal of the Notes

Individual Non-Resident Noteholder generally should not be subject to any Russian taxes in respect of gain or other income realised on a redemption, sale or disposal of the Notes outside the Russian Federation, provided that the proceeds of such sale, redemption, or other disposal of the Notes are not received from either a source within the Russian Federation or from a Russian tax resident, which is an organisation or individual entrepreneur.

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 either from a Russian source or from a Russian tax resident, which is a legal entity or individual entrepreneur, an Individual Non-Resident Noteholder will generally be subject to Russian personal income tax at a rate of 30%, in respect of the gross proceeds from such sale, redemption or other disposal less any available deduction of expenses incurred by the Noteholder (which includes the purchase price of the Notes) subject to any available double taxation treaty relief, as discussed below in "— Taxation of Payments under the Guarantee made by SIBUR — Double Taxation Treaty Relief".

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 the Russian Federation. In absence of any guidance as to what should be considered as a sale, redemption or other disposal of securities "in the Russian Federation", the Russian tax authorities may apply various criteria in order to determine the source of the sale, redemption or other disposal, including looking at the place of conclusion of the transaction, the location of the buyer, or other similar criteria. There is no assurance, therefore, that proceeds received by Individual Non-Resident Noteholders from a sale, redemption or disposal of the Notes will not become subject to tax in the Russian Federation.

Further, 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 an Individual Non-Resident Noteholder (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 sale, redemption or disposal proceeds. - 288-

In certain circumstances, if the sale and/or disposal proceeds (including accrued interest on the Notes) are paid to an Individual Non-Resident Noteholder by a licensed broker or an asset manager, who carries out operations in the Russian Federation in the interests of an Individual Non-Resident Noteholder under an asset management agreement, a brokerage service agreement, an agency agreement or a commission agreement, 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 as the tax agent. The withholding tax rate should be applied to the difference between the proceeds paid to the Individual Non-Resident Noteholder and the amount of duly documented deductions relating to the original purchase cost and related expenses incurred by the Noteholder 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 and a deduction allowed to the Individual Non-Resident Noteholder and tax withheld upon the sale of the Notes.

If a 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 in the absence of a tax agent, an Individual Non-Resident Noteholder is required to file a personal income tax return in the Russian Federation 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 an Individual Non-Resident Noteholder 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 an Individual Non-Resident Noteholder subject to taxation in the Russian Federation.

Since the sales, redemption or other disposal proceeds and deductible expenses for Russian tax purposes are calculated in Russian roubles, 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 the Rouble, i.e. there could be a loss or no gain in the currency of the Notes but a gain in Russian roubles which could be potentially subject to taxation.

Individual Non-Resident Noteholders should consult their 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 the Russian Federation in respect of a sale, redemption or other disposal of the Notes.

Taxation of Principal and Interest under the Notes paid by the Issuer to the Non-Resident Noteholders

Legal Entity Non-Resident Noteholders generally should not be subject to any Russian taxes in respect of payments of principal on the Notes received from the Issuer.

Payments under the Notes may be subject to Russian withholding tax if the Issuer is treated as a Russian tax resident or if the Issuer's activities lead to creation of a permanent establishment for the Issuer in the Russian Federation. In these cases payments of interest under the Notes made by the Issuer to the Non-Resident Noteholders could be recognised by Russian tax authorities as

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subject to Russian withholding tax at a rate of 20% (or 30% in respect of Individual Non-Resident Noteholders).

However, the Russian Tax Code provides an exemption from the obligation to withhold tax from interest paid by a Russian organisation to Legal Entity Non-Resident Noteholders under the "quoted bonds" issued in accordance with the legislation of the foreign jurisdiction (this exemption is also applicable to the foreign organisations, which are either recognised as Russian tax residents, or as those organisations, which activities lead to creation of a permanent establishment in the Russian Federation).

For the purpose of the Russian Tax Code, "quoted bonds" means bonds and other debt obligations (1) which passed the listing procedure and/or (2) which were admitted to circulation on one or more foreign stock exchanges and/or (3) rights to which are recorded by a foreign depositary- clearing organisation, provided such foreign stock exchanges and depositary-clearing organisations are specified in the list of foreign financial intermediaries (the "List"). The current List, which became effective on 16 July 2017, includes Euronext Dublin (the List refers to "Irish Stock Exchange") amongst the recognised foreign stock exchanges and Euroclear and Clearstream, Luxembourg amongst the recognised foreign depositary-clearing organisations.

Criteria (1) and (2) should be satisfied as the Notes will be listed on Euronext Dublin. The Notes should satisfy criterion (3) because the rights to the Notes will be held in Euroclear and Clearstream, Luxembourg, which for the purposes of the Russian Tax Code essentially should mean that the rights to the Notes are "recorded" with one of the above foreign depositary-clearing organisations. According to the Russian Tax Code, in order to be treated as "quoted bonds", fulfilment of one of the above criteria is sufficient. Therefore, the Notes should be recognised as "quoted bonds" for purposes of the Russian Tax Code.

Based on the professional advice received, the Issuer believes that it should be released from the obligation to withhold the Russian withholding tax from interest payments made to Legal Entity Non-Resident Noteholders under the Notes, provided that the Notes continue to be recognised as "quoted bonds" for the purposes of the Russian Tax Code as outlined above.

As a separate matter, please note that the exemption in question has been implemented by releasing a Russian issuer from the duty of withholding the tax, instead of simply categorising such payments as non-taxable per se and eliminating the withholding tax issue completely.

Therefore, one may argue that the immediate effect of the exemption is that the interest under the "quoted bonds" is a taxable income, but there is no corresponding withholding obligation for the Russian issuer. In such circumstances it is necessary to consider whether one may argue that a foreign recipient of income has an outstanding tax obligation vis-a-vis the Russian tax authorities. In this regard please note that, as opposed to non-resident individuals, the Russian Tax Code does not provide for any procedure for a non-resident entity to pay the non-withheld amounts of tax itself and to ensure that any such payment will be properly accounted for by the Russian tax authorities. As the procedure for payment of tax is defined as one of the constitutive elements of tax, and absent any of the constitutive elements a tax may not be considered properly established, there is a strong argument that a foreign recipient of income does not have a liability to pay the non-withheld amounts of tax itself.

As a practical matter, please note that Russian tax administration and enforcement rules are not tailored for collecting taxes from non-residents having no presence in Russia (save for VAT on e- commerce), and the Issuer is aware of any instances where Russian tax authorities have tried to or would try to enforce collection of outstanding taxes from foreign entities that have no presence in Russia. At the same time there is a tendency in the Russian Federation that Russian tax - 290-

administration is gradually giving more focused attention towards complex cross-border arrangements and separate international transactions.

If the Issuer is treated as a Russian tax resident, or the Issuer's activities lead to creation of a permanent establishment for the Issuer in the Russian Federation, the payments under the Notes (including interest and principal amounts under the Notes – in full (if the Issuer is treated as a Russian tax resident) or in the amount attributable to the Russian permanent establishment of the Issuer (if any)) made by the Issuer to Individual Non-Resident Noteholders less any available cost deduction could be subject to Russian taxation at a rate of 30% subject to any available double taxation treaty relief (for details, see "— Taxation of Payments under the Guarantee made by SIBUR — Double Taxation Treaty Relief").

Taxation of Payments under the Guarantee made by SIBUR

Russian withholding tax

Non-Resident Noteholders

Payments following enforcement of the Guarantee to be made by SIBUR to Non-Resident Noteholders to the extent relating to interest on the Notes are likely to be characterised as Russian source income. Accordingly, such payments should be subject to withholding tax at a rate of 20% in the event that a payment under the Guarantee is made to a Legal Entity Non-Resident Noteholder which is not organised under Russian law and which holds the Notes otherwise than through a permanent establishment in the Russian Federation, subject to the provisions outlined in section "— Double Taxation Treaty Relief". In the event a payment under the Guarantee is made to an Individual Non-Resident Noteholder, such payment should be subject to personal income tax at a rate of 30%, subject to the provisions outlined in section "— Double Taxation Treaty Relief".

The Issuer and SIBUR cannot offer any assurance that: (i) double taxation treaty advance relief (or a refund of any taxes withheld) will be available to a Non-Resident Noteholder with respect to payments under the Guarantee or (ii) that such withholding tax would not be imposed upon the entire payment under the Guarantee, including with respect to the principal amount of the Notes. The imposition or the possibility of the imposition of this withholding tax could adversely affect the value of the Notes.

Under the gross-up provisions for the Notes, if payments made under the Guarantee are subject to any withholding taxes for any reason (as a result of which SIBUR would be obligated to reduce the payments to be made under the Guarantee by the amount of such taxes to be withheld), SIBUR is required to increase the payments as may be necessary so that the net amounts received in respect of such payments after such withholding or deduction will equal the respective amounts that would have been received in respect of such payments in the absence of such withholding or deduction. Recently, the Russian tax legislation has been amended to explicitly permit settlement of a taxpayer's obligations by other parties. Under the previous tax regime, the absence of such provision was perceived as being one of the key obstacles for the enforceability of gross-up provisions in Russia. Notwithstanding this recent change to the legislation, there is still is a risk - 291-

that the tax gross-up for withholding tax will not take place and that the full amount of the payments made by SIBUR will be reduced by Russian withholding income tax at a rate of 20% (or 30% in respect of Individual Non-Resident Noteholders).

Non-Resident Noteholders should consult their tax advisors with respect to the tax consequences of the receipt of payments under the Guarantee, including applicability of any available double taxation treaty relief.

Resident Noteholders

A Resident Noteholder is 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 payments to be received by such Noteholder under the Guarantee.

Resident Noteholders should consult their tax advisers with respect to the tax consequences of the receipt of payments under the Guarantee.

The Eurobond Exemption

The Russian Tax Code provides for exemption from withholding obligation in relation to interest income paid by a Russian company on a debt obligation ("Eurobond Exemption"), provided that the following conditions are cumulatively met: a. debt obligations of a Russian company, in respect of which interest income is paid, have arisen in connection with the issuance of "quoted bonds" by foreign companies; and b. the foreign company receiving the interest income is tax resident in a jurisdiction which has a double taxation treaty with Russia and its residency is confirmed by the tax residency certificate.

The term "quoted bonds", under the Eurobond Exemption has the same meaning as for the purposes of the exemption outlined in "—Taxation of the Notes — Taxation of Principal and Interest under the Notes paid by the Issuer to the Non-Resident Noteholders" above.

A debt obligation qualifies as being connected with the issuance of "quoted bonds" by foreign companies if it is expressly stated as being such in the agreement governing the relevant debt obligation and/or in the terms and conditions and/or the prospectus for the issuance of "quoted bonds", or if this fact is confirmed by the actual transfer of funds upon the issuance of "quoted bonds".

The Eurobond Exemption applies not only to interest amounts, but also to other payments made by a Russian borrower, provided that such payments are contemplated by the terms of the relevant debt obligation, or are made in connection with the terms of the relevant quoted bonds and/or debt obligation (including the early buy-back or redemption thereof). In addition, the Eurobond Exemption applies to payments made under guarantees provided by Russian companies in respect of the debt obligations that have arisen in connection with the issuance of "quoted bonds" by foreign companies and/or "quoted bonds".

As a separate matter, please note that the Eurobond Exemption has been implemented by releasing a Russian borrower (or other payer, e.g., a guarantor) from the duty of withholding the tax on the qualifying interest payments, instead of simply categorising such payments as non-taxable per se and eliminating the withholding tax issue completely (see "—Taxation of the Notes — Taxation of Principal and Interest under the Notes paid by the Issuer to the Non-Resident Noteholders" above).

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It is possible that all or part of the proceeds from the issue of the Notes may be used by the Issuer to provide loans to one or several companies of the Group. The Company believes that it should be possible to satisfy conditions established by the Russian Tax Code outlined above and obtain a release from the obligation to withhold tax from payments under the Guarantee based on the Eurobond Exemption.

At the same time, should any of the above conditions for application of the Eurobond Exemption be not met or should interpretation of the Eurobond Exemption by the tax authorities differ from the Company's, there is a possibility that the Eurobond Exemption does not apply to payments (in full or in part) made by the Guarantor under the Guarantee.

Russian VAT

Payments under the Guarantee to be made by SIBUR attributable to the principal amount or interest under the Notes and the additional tax gross-up amounts should not be subject to Russian VAT. The payments under the Guarantee attributable to compensation of other expenses (if any) could be subject to Russian VAT.

All payments made by SIBUR with respect to the Guarantee will, except in certain limited circumstances, be made free and clear of and without withholding or deduction for, or on account of, any present or future taxes unless the withholding or deduction for, or on account of, such taxes is then required by law. In the event of such a deduction or withholding, SIBUR, as applicable, will pay such additional amounts as may be necessary in order that the net amounts received in respect of such payments after such withholding or deduction will equal the respective amounts that would have been received in respect of such payments in the absence of such withholding or deduction. While the Prospectus provides for SIBUR to pay such corresponding amounts in these circumstances, similar to withholding tax application, it is unclear whether a tax gross-up clause such as that contained in this Prospectus is enforceable in the Russian Federation. There is a risk that the tax gross-up for VAT will not take place and that the portion of the payments under the Guarantee attributable to compensation of other expenses (if any) made by SIBUR, which is a Russian legal entity, will be reduced by Russian VAT at a rate of 20%.

Noteholders should consult their tax advisers with respect to the Russian VAT consequences of the receipt of payments under the Guarantee.

Double Taxation Treaty Relief

Advance relief

The Russian Federation has double taxation treaties with a number of countries. These double taxation treaties may contain provisions that allow for the reduction or elimination of Russian withholding taxes with respect to income or proceeds received by Non-Resident Noteholders from a source within Russia, including income or proceeds from the sale, redemption or other disposal of the Notes. To the extent double taxation treaty relief is available and the Russian Tax Code requirements are met (i.e. the "beneficial ownership" concept), a Non-Resident Noteholder must comply with the information, documentation and reporting requirements which are then in force in the Russian Federation in order to obtain such relief.

A Legal Entity Non-Resident Noteholder who is the beneficial owner of income or proceeds in terms of an applicable double taxation treaty and the Russian Tax Code would need to provide the payer of the income or proceeds with a certificate of tax residence issued by the competent tax authority of the relevant treaty country in advance of payment of income or proceeds in order to obtain a relief from Russian withholding taxes under a double taxation treaty. This certificate

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should confirm that the respective Legal Entity Non-Resident Noteholder is a tax resident of the relevant double taxation treaty country in the particular calendar year during which the income or proceeds is paid. This certificate should generally be apostilled or legalised (although certificates issued by a number of jurisdictions are accepted without apostil or legalisation based on a double taxation treaty or mutual agreement between authorised bodies) and needs to be renewed on an annual basis. A notarised Russian translation of the certificate may be required. However, the payer of the income or proceeds in practice may request additional documents confirming the eligibility of the Legal Entity Non-Resident Noteholder for the benefits of the double taxation treaty. Provision of tax residency certificate is not compulsory for non-Russian banks, provided their residency may be confirmed by a tax agent from public sources, however, current legislation does not provide for explicit definition of rightful data sources.

In order to enjoy benefits under an applicable double taxation treaty, the person claiming such benefits must be the beneficial owner of the relevant income or proceeds according to the respective requirements of the Russian Tax Code. As a result of this in addition to a certificate of tax residency, the Russian Tax Code obliges the Legal Entity Non-Resident Noteholder to provide the tax agent with a confirmation that it is the beneficial owner of the relevant income or proceeds in advance of payment of income or proceeds. As of the date of this Prospectus, there has been no clear guidance on the form or contents of such confirmation. At the same time, according to the recent changes to the Russian Tax Code, certain types of companies listed stock exchanges located in OECD-member states (provided their listed shares/depositary receipts represent more than 25% of their share capital) as well as foreign entities directly owned by the Russian Federation or a foreign state exchanging tax information with Russia by more than 50%, are viewed as beneficial owners of income and may confirm their beneficial entitlement to income by submitting self- certification confirmation letter and documents proving the requirements to listing and/or their ownership by Russia or the foreign state. Due to introduction of the beneficial ownership concept into Russian domestic law, there can be no assurance that the treaty relief at source will be available in practice.

Currently, in order to obtain a full or partial exemption from taxation in Russia under an applicable double taxation treaty at source, an Individual Non-Resident Noteholder should confirm to a tax agent that he or she is a tax resident in a relevant foreign jurisdiction having a double taxation treaty with the Russian Federation 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 foreign resident in accordance with an international treaty, and (iii) if such passport/document does not confirm tax resident status in a foreign country, upon request of the tax agent, an official confirmation issued by the competent authorities evidencing his or her status of a tax resident in the respective country. A notarised Russian translation of such official confirmation 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 taxation treaty at source. As of the date of this Prospectus, there has been no guidance on the applicability of the beneficial owner concept to Non-Resident Noteholder-Individuals and it is at the moment unclear how it will be applied in practice.

Non-Resident Noteholders should consult their own tax advisers with respect to the applicability of any double taxation treaty relief and the relevant procedures required in Russia.

Refund of Tax Withheld

If (i) Russian withholding tax on income derived from either Russian sources, or from a Russian tax resident, which is an organisation 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 - 294-

double taxation 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 can be filed within three years from the end of the tax period in which the tax was withheld or paid (subject to limitations described below).

In order to obtain a refund, the Legal Entity 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 taxation treaty country and other documents confirming the right for a refund under the Russian Tax Code (including the above Russian Tax Code requirements under the "beneficial ownership" concept).

If an Individual Non-Resident Noteholder wishes to obtain a refund, he or 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 (if there is an agent in Russia). If 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 taxation treaty with the Russian Federation, the individual can file a claim for a refund and documents confirming the right for a refund directly with the Russian tax authorities. As of the date of this Prospectus, there has been no guidance on the applicability of the beneficial owner concept to Non-Resident Noteholder-Individuals and it is at the moment unclear how it will be applied in practice.

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 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.

IRISH TAXATION

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: - 295-

(i) the Notes are held in a clearing system recognised by the Irish Revenue Commissioners; (DTC, 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:

(a) from whom the Issuer has acquired assets;

(b) to whom the Issuer has made loans or advances; or

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 – - 296-

(a) provides for the exchange, on a fixed or contingent basis, of one or more payments based on the value, rate or amount of one or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind, or any interest therein or based on the value thereof, and

(b) 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 Euronext Dublin are held in a clearing system recognised by the Irish Revenue Commissioners; (DTC, 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 income 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 - 297-

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 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 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 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

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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.

UNITED STATES TAXATION

General

The following discussion summarises certain U.S. federal income tax consequences relevant to the acquisition, ownership, disposition and retirement of the Notes by a U.S. Noteholder (as defined below), and does not purport to be a complete analysis of all potential tax considerations. This discussion only applies to Notes that are held as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"), and that are purchased in the initial offering at the initial offering price, by U.S. Noteholders. This discussion does not describe all of the U.S. federal income tax consequences that may be relevant to U.S. Noteholders in light of their particular circumstances or to U.S. Noteholders subject to special treatment under U.S. federal income tax law, such as financial institutions; tax-exempt organisations; insurance companies; real estate investment trusts; regulated investment companies; entities or arrangements treated as partnerships for U.S. federal income tax purposes; traders or dealers in securities; persons holding Notes as part of a straddle, hedge, conversion transaction or other integrated transaction; or certain former citizens or residents of the United States. This summary also does not address tax consequences to U.S. Noteholders whose "functional currency" is not the U.S. dollar. Persons considering the purchase of Notes are urged to consult their tax advisors with regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. Furthermore, this discussion does not describe the effect of the tax applicable to the net investment income of certain U.S. Noteholders, the alternative minimum tax, U.S. federal estate and gift tax laws or the effect of any applicable non-U.S., state or local law.

This summary is based on the tax laws of the United States, including the Code, Treasury regulations promulgated thereunder (the "Treasury Regulations"), administrative pronouncements and judicial decisions, each as available and in effect on the date hereof. All of the foregoing are subject to change (possibly with retroactive effect) or differing interpretations which could affect the tax consequences described herein. The Issuer has not and will not seek any rulings or opinions from the Internal Revenue Service (the "IRS") with respect to the matters discussed below. There can be no assurance that the IRS will not take a different position concerning the tax consequences of the acquisition, ownership or disposition of the Notes or that any such position would not be sustained.

For purposes of this summary, a "U.S. Noteholder" is a beneficial owner of Notes, that is for U.S. federal income tax purposes:

• a citizen or individual resident of the United States;

• a corporation or other entity subject to tax as a corporation for U.S. federal income tax purposes created or organised in or under the laws of the United States or any state thereof or the District of Columbia; or

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• an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Notes, the tax treatment of a partner in such partnership will depend on the status of the partner and the activities of the partnership. A U.S. Noteholder that is a partnership and partners in such partnership should consult their own tax advisors as to the tax consequences to them of the partnership acquiring, owning, disposing and retiring Notes.

Special Rules Applicable to Certain Accrual Method Taxpayers

An accrual method taxpayer that reports revenues on an "applicable financial statement" generally must recognise income for U.S. federal income tax purposes no later than the taxable year in which such income is taken into account as revenue in the applicable financial statements. This rule could potentially require such a taxpayer to recognise income for U.S. federal income tax purposes prior to the time such income otherwise would be recognised pursuant to the rules described below. With respect to Notes having original issue discount ("OID"), the rule will be effective for tax years beginning after 31 December 2018. U.S. Noteholders should consult their tax advisors regarding the potential applicability of these rules to their investment in the Notes.

Interest and Original Issue Discount

It is expected that the Notes will be issued without OID for United States federal income tax purposes. However, if the Notes are treated as issued with OID, a U.S. Noteholder, regardless of its accounting method, generally must include in ordinary income the daily portion of any OID on a Note for each day during each taxable year in which a Note is held, determined by using a constant yield-to-maturity method that reflects compounding of interest.

Payments of interest on a Note (including any additional amounts paid in respect of taxes required to be deducted or withheld) generally will be included in the income of a U.S. Noteholder as taxable ordinary income from sources outside of the United States in accordance with the U.S. Noteholder's method of accounting for United States federal income tax purposes, which may be relevant in calculating a U.S. Noteholder's foreign tax credit limitation. The limitation on foreign taxes eligible for credit is calculated separately with respect to two specific classes of income. For this purpose, interest income on the Notes will constitute "passive category income" for most U.S. Noteholders. The rules governing foreign tax credits are complex and U.S. holders should consult their own tax advisers regarding the availability of foreign tax credits in their particular circumstances.

Sale, Exchange, Retirement or Other Disposition

Upon the sale, exchange, retirement or other disposition of a Note, a U.S. Noteholder generally will recognise capital gain or loss equal to the difference between the amount realised on the sale, exchange, retirement or other disposition (other than accrued but unpaid interest which will be treated like a payment of interest) and the U.S. Noteholder's adjusted tax basis in such Note. A U.S. Noteholder's adjusted tax basis in a Note generally should equal the cost of the Note to such U.S. Noteholder increased by any OID included in the U.S. Noteholder's income with respect to that Note and reduced by any payments other than stated interest.

Any capital gain or loss recognised on the disposition of a Note will generally be long-term capital gain or loss if the U.S. Noteholder has held the Note for more than one year. Long-term capital gain of a non-corporate U.S. Noteholder is generally subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations. - 300-

In most circumstances, gain or loss realised by a U.S. Noteholder on the sale, exchange, retirement or other disposition of a Note generally will be treated as U.S. source income or loss, as the case may be, for U.S. foreign tax credit limitation purposes.

Possible Effect of Substitution of the Issuer

Provided that certain conditions are satisfied, another entity may be substituted, without the consent of the Noteholders, as the principal obligor in respect of the Notes under Condition 12.4 of the Terms and Conditions. Depending on the circumstances, such substitution could result in certain adverse tax consequences for a U.S. Noteholder, including recognition of gain or loss from a "deemed exchange" of the Notes and accrual of any OID on the Notes. U.S. Noteholders should consult their tax advisors regarding the consequences to them of such a substitution.

Backup Withholding and Information Reporting

Information returns may be filed with the IRS in connection with payments on the Notes and the proceeds from a sale or other disposition of the Notes. A U.S. Noteholder may be subject to U.S. backup withholding on these payments if the U.S. Noteholder fails to provide its taxpayer identification number to the paying agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment to a U.S. Noteholder will be allowed as a credit against the U.S. Noteholder's United States federal income tax liability and may entitle the U.S. Noteholder to a refund, provided that the required information is timely furnished to the IRS.

Foreign Asset Reporting

Certain U.S. Noteholders are required to report information relating to an interest in the Notes, subject to certain exceptions (including an exception for Notes held in accounts maintained by U.S. financial institutions), by attaching a completed IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they had an interest in the Notes. U.S. Noteholders are urged to consult their tax advisers regarding information reporting requirements relating to their ownership and disposition of the Notes.

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SUBSCRIPTION AND SALE

Pursuant to a Subscription Agreement dated 19 September 2019, Bank GPB International S.A., Goldman Sachs International, J.P. Morgan Securities plc, Sberbank CIB (UK) Limited and Banca IMI S.p.A., acting through its London Branch have been appointed as Joint Lead Managers in connection with the Offering. The Joint Lead Managers have, in the Subscription Agreement, severally and not jointly, nor jointly and severally, agreed with the Issuer and the Guarantor, subject to the satisfaction of certain conditions, to subscribe for the Notes at 100% of their principal amount in the following amounts:

Principal Amount of Notes Joint Lead Managers (U.S.$) Bank GPB International S.A ...... 124,950,000 Goldman Sachs International ...... 124,950,000 J.P. Morgan Securities plc ...... 124,950,000 Sberbank CIB (UK) Limited ...... 124,950,000 Banca IMI S.p.A., acting through its London Branch ...... 200,000 TOTAL ...... 500,000,000

The Issuer (failing whom the Guarantor) has agreed to pay to the Joint Lead Managers a combined management, underwriting and selling commission (which shall be an agreed percentage of the aggregate principal amount of the notes) in consideration of their obligations undertaken in the Subscription Agreement. In addition, the Issuer (failing whom the Guarantor) has agreed to reimburse the Joint Lead Managers for certain of their expenses in connection with the issue of the Notes. The Subscription Agreement entitles the Joint Lead Managers to terminate it in certain circumstances prior to payment being made to the Issuer. The Issuer and the Guarantor have in the Subscription Agreement agreed to indemnify the Joint Lead Managers against certain liabilities incurred in connection with the issue of the Notes, including liabilities under the Securities Act.

The Joint Lead Managers and their respective affiliates may have performed various financial advisory, investment banking and commercial banking services for, and may arrange loans and other non-public market financing for, and enter into derivative transactions with, the Company and its affiliates (including its shareholders and the Issuer) and for which they may receive customary fees and expenses. Each of the Joint Lead Managers and their respective affiliates may, from time to time, engage in further transactions with, and perform services for, the Issuer and the Group in the ordinary course of their respective businesses.

United States

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 except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Securities are being offered and sold outside of the United States on reliance on Regulation S. The Subscription Agreement provides that the Joint Lead Managers may directly or through their respective U.S. broker-dealer affiliates arrange for the offer and resale of Securities in the United States only to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A.

In addition, until 40 days after the commencement of the Offering of the Securities, an offer or sale of the Securities with the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A.

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United Kingdom

Each of the Joint Lead Managers has severally and not jointly, nor jointly and severally, represented and agreed in the Subscription Agreement that:

(a) 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 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 or the Guarantor; and

(b) 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 of the Joint Lead Managers has severally and not jointly, nor jointly and severally, represented, warranted and agreed in the Subscription Agreement that it and its affiliates have not offered or sold or otherwise transferred, and will not offer or sell or otherwise transfer as part of their initial distribution or at any time thereafter, any Notes to or for the benefit of any persons (including legal entities) resident, incorporated, established or having their usual residence in the Russian Federation, or to any person located within the territory of the Russian Federation unless and to the extent otherwise permitted under Russian law.

Ireland

Each Joint Lead Manager has severally and not jointly, nor jointly and severally, represented, warranted 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 regarding MTFs and OTFs)) thereof, any codes 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 Prospectus Regulation (EU) 2017/1129 (as may be amended from time to time) 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), the European Union (Market Abuse) 2016 (as amended) and any rules and guidance issued by the Central Bank under Section 1370 of the Companies Act. - 303-

Prohibition of Sales to EEA Retail Investors

Each Joint Lead Manager has severally (and not jointly nor jointly and severally) represented, warranted 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 EEA. For these purposes 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 IDD, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

Singapore

Each Joint Lead Manager has severally and not jointly, nor jointly and severally represented, warranted and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the 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, this Prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the SFA) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, 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.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law;

(4) as specified in Section 276(7) of the SFA; or

(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.

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General

None of the Joint Lead Managers, the Issuer or the Guarantor makes any representation that any action will be taken in any jurisdiction by the Joint Lead Managers, the Issuer or the Guarantor that would or is intended to permit a public offering of the Notes, or the possession or distribution of any Prospectus or any other material relating to the Offering or the Notes, where action for such purpose is required. Accordingly, each Joint Lead Manager, the Issuer and the Guarantor represents severally and not jointly nor jointly and severally that it will comply to the best of its knowledge and belief in all material respects with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Notes or has in its possession or distributes any Prospectus or any other offering material or advertisement in connection with the Notes. All sales of the Notes by the Joint Lead Managers will be made on the same terms.

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GENERAL INFORMATION

1. The Notes have been accepted for clearance through Euroclear, Clearstream, Luxembourg, and DTC. The common code of the Regulation S Notes is 201004462 and the ISIN is XS2010044621. The common code of the Rule 144A Notes is 111730539, the CUSIP number is 825795AB3 and the ISIN is US825795AB30.

2. So long as any of the Notes are outstanding and the Notes are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Issuer will promptly furnish, for the benefit of the holders from time to time of Notes, upon request, to holders of Notes and prospective purchasers designated by any such holders, information required to be disclosed by subsection (d)(4) of Rule 144A (or any successor provision).

3. The Legal Entity Identifier of the Issuer is 635400EHVYJXNYBPWI41.

4. The Legal Entity Identifier of the Guarantor is 253400CH24ZBBZMFSM69.

5. So long as any of the Notes are outstanding and the Guarantee is a "restricted security" within the meaning of Rule 144(a)(3) under the Securities Act, the Guarantor will promptly furnish, for the benefit of holders from time to time of the relevant Notes, upon request, to holders of Notes and prospective purchasers designated by any such holders, information required to be disclosed by subsection (d)(4) of Rule 144A (or any successor provision).

6. It is expected that the listing of the Notes on the Official List of Euronext Dublin and the admission of the Notes to trading on the Regulated Market will take place on or about 23 September 2019, subject to the issuance of the Global Notes. Transactions will normally be effected for delivery on the third business day after the transaction.

7. Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in relation to the Notes and is not itself seeking admission of the Notes to the Official List of Euronext Dublin or to trading on the Regulated Market for the purposes of the Prospectus Regulation.

8. For so long as any of the Notes are listed on the Official List of Euronext Dublin and admitted to trading on the Regulated Market, copies of the following documents may be inspected at and are available free of charge in physical form at the registered office of the Issuer, the Guarantor and the specified office of the Principal Paying Agent in London during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted):

• the certificate of incorporation of the Issuer and articles of association of the Issuer (also available at: https://www.ise.ie/debt_documents/Memoradum%20and%20Articles%20of%20 Association_572e21de-b116-47a9-8039-5ad2b326f3b9.PDF);

• a copy of the charter (also available at: https://www.sibur.ru/en/about/corporate/documents/) of the Guarantor (together with an English translation thereof; any investor receiving an English translation acknowledges that such translation is provided solely for the benefit of the investor and that, in the instance of any dispute, the original document will prevail. The

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Group affirms that any English translation provided will be direct and accurate in all material respects);

• the Trust Deed, including the forms of the Global Notes;

• the Guarantee;

• the Prospectus.

The Trust Deed and the Guarantee 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=4433&FIELDSORT=docId on the Issue Date.

9. Web-links to the audited financial statements of the Issuer:

• as of and for the year ended 31 December 2017: https://www.ise.ie/debt_documents/Annual%20Report%20and%20Financial%20 Statements%20for%20Year%20End%2031%20December%202017_970710f5- 53b4-42d0-8a03-1c47031c9fab.PDF;

• as of and for the year ended 31 December 2016: https://www.ise.ie/debt_documents/Annual%20Report%20and%20Financial%20 Statements%20for%20Year%20End%2031%20December%202016_9e762dbb- 72d7-402c-a996-91d92bbbd3ef.PDF;

• as of and for the year ended 31 December 2015: https://www.ise.ie/debt_documents/Annual%20Report%20and%20Financial%20 Statements%20for%20Year%20End%2031%20December%202015_48952611- cf3e-445f-8273-6d9f1544431b.PDF.

10. The issuance of the Notes has been authorised by a decision of the board of directors of SIBUR Securities DAC dated 5 September 2019.

11. No consents, approvals, authorisations or orders of any regulatory authorities are required by the Issuer or the Guarantor under the laws of Ireland or the Russian Federation for issuing the Notes or the giving of the Guarantee.

12. Since 31 December 2017, there has been no material adverse change in the prospects of the Issuer, such date being the date of the last audited financial statements of the Issuer.

13. Since 31 December 2017, there has been no significant change in the financial performance of the Issuer, such date being the date of the last audited financial statements of the Issuer.

14. There has been no material adverse change in the prospects of either the Guarantor or the Group since 31 December 2018, such date being the date of the last audited financial information of the Group.

15. There has been no significant change in the financial performance of either the Guarantor or the Group since 30 June 2019, such date being the date of the latest unaudited interim condensed financial information of the Group.

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16. There have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer or the Guarantor are aware) during a period covering at least the previous 12 months, which may have, or have had in the recent past, significant effects on each of the Issuer's, the Guarantor's or the Group's financial position or profitability.

17. The Issuer does not intend to provide post-issuance transaction information regarding the Notes or the Guarantee.

18. The total fees and expenses in relation to the admission to trading of the Notes are expected to be approximately EUR 5,000.

19. The language of the 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.

20. Any website referred to in this document does not form part of the Prospectus and has not been scrutinised or approved by the Central Bank of Ireland

21. The Guarantor (website https://www.sibur.ru/en/) is a public joint stock company incorporated and existing under the Civil Code of the Russian Federation, the Federal Law No. 208-FZ on Joint Stock Companies and other applicable laws of the Russian Federation with the legal name Public Joint Stock Company "SIBUR Holding". The Guarantor was registered in the Russian Federation on 8 July 2005 under the principal state registration number 1057747421247. The Guarantor's registered address is Russia, 1177997, Moscow, 16/1 Krzhizhanovskogo Street, and its telephone number is +7 495 777 5500.

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GLOSSARY OF TECHNICAL TERMS

The following technical terms are used in this Prospectus:

Acrylates are liquids with strong odour and include ethers of acrylic acid, butyl, methyl and ethyl. Acrylates are mainly used in the production of acrylic emulsions, superabsorbents, building mixes and adhesives used in the construction and textile industries.

Alcohols are colourless liquids, which include 2-ethylhexanol, n-butyl alcohol and isobutyl alcohol. Alcohols are used in organic synthesis for production of plasticisers, acetates, acrylates, oil additives, as solvents for plastics and varnish, as anti-foaming agent, as well as a component for perfume compounds.

Associated petroleum is a gas by-product of oil production with very high content of C2+ gas (APG) fractions (ranging from 8% to over 40% of mass). APG comprises solution gas found in oil reservoirs and gas from the gas caps of oil fields. APG can be utilised either through gas processing or, alternatively, as an in-field fuel source for power generation or reverse injection into oil reservoirs.

Benzene is an aromatic hydrocarbon in the form of a colourless, flammable liquid, which is primarily used as a feedstock for styrene monomer, phenol and caprolactam production.

Biaxially Oriented PP include coextruded, coated, non-heat sealable or homopolymer films films (BOPP – films) in a variety of finishes. BOPP-films are mainly used by the retail industry for packaging and production of price tags and labels and adhesive tapes.

Butadiene is an industrial chemical used in the production of styrene-butadiene, polybutadiene, nitrile, polychloroprene rubbers and SBCs.

Butyl rubbers (IIR) is a copolymer of isobutylene and a small amount of isoprene, characterised by gas impermeability. Butyl rubbers are mainly used for production of tyre inner tubes, as well as adhesives, sealants, diaphragms for tyres, and chewing gums.

Dioctyl terephthalate colourless almost odourless liquid which is primarily used as a (DOTP) plasticizer for PVC toys, childcare articles, consumer products, beverage closures and other polymer materials including cellulose acetate-butyrate, cellulose nitrate, and chloroprene rubbers. It is deemed to be one of the safest plasticisers for both human health and environment.

Gas fractionation unit is the final processing step of raw NGL. At fractionation stage, raw (GFU) NGL is separated into LPG (propane, butane fractions and their mixes) and naphtha, which are either sold to energy market clients or used as petrochemical feedstock.

Gas Processing Plant is a processing plant where APG is separated into natural gas (C1-2 (GPP) fractions) and raw NGL (C2+ fractions).

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Ethylene oxide is a derivative of ethylene.

Expandable polystyrene is a granulated polymer with round granules made from styrene (EPS) monomer. Expandable polystyrene is used for production of thermo- insulation blocks, packaging materials as well as for decorative elements.

Glycols are viscous liquids, which include MEG, diethylene glycol and triethylene glycol. Glycols are used primarily for production of PET, polyester fiber, de-icing liquids, cooling and anti-freezing liquids, extragent for aromatic hydrocarbons and reagent for natural gas drying.

High-density white semi-transparent pellets or amorphous mass with no odour, polyethylene (HDPE) characterised by excellent chemical resistance, good wear resistance and low moisture absorption rates. It is widely used in production of pipes, films, general goods, parts of electric appliances.

Isobutylene is a hydrocarbon used in production of butyl (isobutylene-isoprene) rubber and isoprene (the monomer for butyl and polyisoprene rubbers), SBCs (styrene-isoprene-styrene thermoplastic elastomer).

Isoprene is a heat sensitive organic compound used in the production of butyl (isobutylene-isoprene) and polyisoprene rubber, SBCs (styrene- isoprene-styrene thermoplastic elastomer).

Isoprene/polyisoprene are commodity rubbers primarily used in the production of tyres, rubbers (IR) rubber goods, footwear, medical applications and sealants and adhesives.

Linear low-density white semi-transparent pellets or amorphous mass with no odour is polyethylene (LLDPE) characterised by excellent chemical resistance, good wear resistance and low moisture absorption rates. It is widely used in production of films, tubes, stretch wrapping.

Liquefied petroleum refers primarily to propane (C3 fractions), butane, isobutane (C4 gases (LPG) fractions) or propane-butane mixtures. The choice of propane, butane or propane-butane mixtures is usually determined by a combination of the intended end use and desired physical properties. LPG is used as a motor fuel, feedstock for petrochemicals production as well as a fuel for heating.

Low density is a granulated thermoplastic polymer with geometrically identical polyethylene (LDPE) granules. LDPE is used as a feedstock in manufacturing general- purpose consumer goods, coating materials for electrotechnical and energy industry, film for agricultural industry as well as various packaging.

Maleic anhydride off-white pellets or crystalline mass with acrid odour. It is used (MAN) primarily in the formulation of unsaturated polyester resins for use in boats, autos, trucks, buildings, piping, and electrical goods. Also, lube oil adhesives are synthesised from maleic anhydride. Another

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big area of its consumption is production of copolymers, pesticides, and other organic compounds.

Methyl tertiary butyl is a fuel additive used to obtain higher octane values for gasoline. ether (MTBE)

Natural gas is a hydrocarbon gas mixture primarily comprising methane (C1 fraction) and ethane (C2 fraction). Methane is primarily used as a fuel for power generation, residential, commercial and industrial applications as well as feedstock for the production of mineral fertilisers and methanol. Ethane can also be used as a chemical feedstock. Natural gas is an equivalent of dry gas.

Natural gas liquids comprise raw NGL, LPG and naphtha. (NGLs)

Nitrile-butadien rubber is a complex mixture of unsaturated co-polymers of acrylonitrile and (NBR) butadiene, characterised by oil and petrol resistance quality.

Polybutadiene rubbers are commodity rubbers primarily used in the production of tyres, as (PBR) well as general rubber and abrasion goods and plastic modification.

Polyethylene is a polymer resin of the polyester family. It is primarily used in terephthalate (PET) manufacturing of PET packaging for beverages and food, as well as other containers.

Polypropylene (PP) is a polymer consisting of propylene fragments. PP is used as a feedstock in manufacturing of general-purpose consumer goods, various packaging, BOPP-films, hygiene products, pipes, fibres and automotive components.

Propylene is mainly produced as a by-product alongside ethylene in the steam cracking process, but can also be derived as by-product of crude oil refining or produced "on-purpose" by the dehydrogenation of propane.

Polyvinyl chloride is produced by polymerisation of vinyl chloride. PVC is primarily (PVC) used for pipe and fitting applications, including construction, irrigation and drainage.

Pure terephthalic acid is the organic compound, which is colourless and solid and is a (PTA) commodity chemical, used principally as a precursor to the polyester.

Raw NGL represents a mixture of hydrocarbon fractions from C3 to C6 (including propane, normal butane, pentane, hexane). Raw NGL is primarily used as feedstock for fractionation into energy products and as feedstock for petrochemicals production.

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Styrene is an aromatic hydrocarbon (a derivative of benzene) used in the production of polystyrene (general purpose, expandable and high- impact), ABS plastics, styrene-butadiene rubbers and styrene block copolymers.

Styrene-butadiene are commodity rubbers derived from styrene and butadiene, used in rubbers (SBR) automotive industry primarily for the production of tyres.

Synthetic rubber is a type of artificial elastomer. An elastomer is a material with the mechanical property that can undergo much more elastic deformation under stress than most other materials and still return to its previous size without permanent deformation.

Thermoplastic are complex polymeric molecules, which consist of parts with both elastomers (TPE) thermoplastic and elastomeric properties. TPE are primarily used in construction, healthcare, automotive and electronics.

Unstable gas are C3+ fractions obtained from processing of wet natural gas condensate extracted from gas fields.

Wet natural gas is non-associated gas extracted from gas fields and processed by gas producers to separate natural gas from the heavier NGLs (C3+ fractions).

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INDEX TO FINANCIAL INFORMATION

Consolidated Interim Condensed Financial Information (Unaudited) of the Group as of and for the six months ended 30 June 2018 ...... F-2

Report on Review of Consolidated Interim Condensed Financial Information ...... F-4

Consolidated Interim Condensed Statement of Profit or Loss (Unaudited) ...... F-5

Consolidated Interim Condensed Statement of Financial Position (Unaudited) ...... F-6

Consolidated Interim Condensed Statement of Cash Flows (Unaudited) ...... F-7

Consolidated Interim Condensed Statement of Changes in Equity (Unaudited) ...... F-8

Consolidated Interim Condensed Statement of Comprehensive Income (Unaudited) ...... F-9

Notes to Consolidated Interim Condensed Financial Information (Unaudited) ...... F-10

Consolidated Financial Statements of the Group as of and for the year ended 31 December 2018 . F-29

Independent Auditor's Report ...... F-31

Consolidated Statement of Profit or Loss ...... F-38

Consolidated Statement of Financial Position ...... F-39

Consolidated Statement of Cash Flows ...... F-40

Consolidated Statement of Changes in Equity ...... F-41

Consolidated Statement of Comprehensive Income ...... F-42

Notes to Consolidated Financial Information ...... F-43

Consolidated Financial Statements of the Group as of and for the year ended 31 December 2017 . F-99

Independent Auditor's Report ...... F-101

Consolidated Statement of Profit or Loss ...... F-108

Consolidated Statement of Financial Position ...... F-109

Consolidated Statement of Cash Flows ...... F-110

Consolidated Statement of Changes in Equity ...... F-111

Consolidated Statement of Comprehensive Income ...... F-112

Notes to Consolidated Financial Information ...... F-113

F-1

PJSC SIBUR Holding

International Financial Reporting Standards Consolidated Interim Condensed Financial Information (Unaudited)

As of and for the three and six months ended 30 June 2019

F-2

Table of Contents

Report on Review of Consolidated Interim Condensed Financial Information

Consolidated Interim Condensed Statement of Profit or Loss (unaudited) ...... 1 Consolidated Interim Condensed Statement of Financial Position (unaudited) ...... 2 Consolidated Interim Condensed Statement of Cash Flows (unaudited) ...... 3 Consolidated Interim Condensed Statement of Changes in Equity (unaudited) ...... 4 Consolidated Interim Condensed Statement of Comprehensive Income (unaudited) ...... 5

Notes to the Consolidated Interim Condensed Financial Information (unaudited):

1 Nature of Operations ...... 6 2 Critical Accounting Estimates and Judgements in Applying Accounting Policies ...... 6 3 Revenue ...... 6 4 Operating Expenses ...... 7 5 Finance Income and Expenses ...... 7 6 Segment Information ...... 7 7 Contracts on Construction Services ...... 10 8 Property, Plant and Equipment...... 11 9 Right-of-use Assets ...... 12 10 Investments in Joint Ventures and Associates ...... 12 11 Trade and Other Receivables ...... 13 12 Inventories...... 13 13 Prepayments and Other Current Assets ...... 13 14 Long-Term Debt Excluding Related to ZapSibNeftekhim ...... 14 15 Long-Term ZapSibNeftekhim Related Debt ...... 15 16 Deferred Income from Grants and Subsidies ...... 16 17 Other Non-Current Liabilities ...... 16 18 Trade and Other Payables ...... 16 19 Short-Term Debt and Current Portion of Long-Term Debt Excluding Related to ZapSibNeftekhim ...... 17 20 Taxes Other than Income Tax Payable ...... 17 21 Shareholders’ Equity ...... 17 22 Income Tax ...... 17 23 Cash Generated from Operations and Net Debt Reconciliation ...... 18 24 Related Parties ...... 19 25 Fair Value of Financial Instruments ...... 20 26 Commitments, Contingencies and Operating Risks ...... 21 27 Basis of Preparation and Significant Accounting Policies ...... 22 28 New Accounting Developments ...... 24 Contact Info ...... 24

F-3 F-4 F-5 PJSC SIBUR HOLDING CONSOLIDATED INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION (unaudited) (In millions of Russian rubles, unless otherwise stated)

Notes 30 June 2019 31 December 2018 Assets Non-current assets 8 Property, plant and equipment 828,329 769,309 Advances and prepayments for capital construction 24,885 33,988 9 Right-of-use assets 18,660 - Goodwill 12,097 12,097 Intangible assets excluding goodwill 100,666 103,454 10 Investments in joint ventures and associates 38,871 35,853 Deferred income tax assets 9,386 8,465 Long-term advances issued under project management and construction services 50,500 53,509 11 Trade and other receivables 9,875 6,576 Other non-current assets 4,446 7,266 Total non-current assets 1,097,715 1,030,517 Current assets 12 Inventories 44,556 40,467 Prepaid current income tax 1,569 1,190 11 Trade and other receivables 57,318 45,209 13 Prepayments and other current assets 27,318 26,620 Short-term advances issued under project management and construction services 94,842 86,164 Prepaid borrowing costs 3,479 4,091 Cash and cash equivalents 18,925 14,783 Total current assets 248,007 218,524 Assets classified as held for sale 9,973 9,605 Total assets 1,355,695 1,258,646 Liabilities and equity Non-current liabilities 14 Long-term debt excluding related to ZapSibNeftekhim 78,143 73,337 15 Long-term ZapSibNeftekhim related debt 238,950 236,940 Long-term lease liabilities 12,299 - 16 Deferred income from grants and subsidies 59,691 55,335 Long-term advances received under project management and construction services 63,323 66,268 Deferred income tax liabilities 36,536 34,261 17 Other non-current liabilities 18,683 15,885 Total non-current liabilities 507,625 482,026 Current liabilities 18 Trade and other payables 117,659 119,888 Short-term advances received under project management and construction services 85,044 76,891 Income tax payable 2,493 4,640 Short-term debt and current portion of long-term debt excluding related 19 to ZapSibNeftekhim 20,103 13,300 15 Current portion of long-term ZapSibNeftekhim related debt 12,907 8,834 Short-term lease liabilities 5,190 - 20 Taxes other than income tax payable 9,050 10,924 Total current liabilities 252,446 234,477 Liabilities associated with assets classified as held for sale 1,757 1,679 Total liabilities 761,828 718,182 Equity 21 Ordinary share capital 21,784 21,784 Share premium 9,357 9,357 Equity-settled share-based payment plans 32,450 32,450 Retained earnings 521,997 468,879 Total equity attributable to the shareholders of the parent company 585,588 532,470 Non-controlling interest 8,279 7,994 Total equity 593,867 540,464 Total liabilities and equity 1,355,695 1,258,646

The accompanying notes on pages 6 to 24 are an integral part of this consolidated interim condensed financial information

2 F-6 PJSC SIBUR HOLDING CONSOLIDATED INTERIM CONDENSED STATEMENT OF CASH FLOWS (unaudited)

(In millions of Russian rubles, unless otherwise stated)

Six months ended 30 June Notes 2019 2018 Operating activities 23 Cash from operating activities before income tax payment 75,422 81,443 Income tax paid (20,215) (10,798) 23 Net cash from operating activities 55,207 70,645 Investing activities Purchase of property, plant and equipment (65,171) (69,118) Purchase of intangible assets and other non-current assets (2,514) (1,189) 16 Grants and subsidies received 5,830 2,378 25 Acquisition of interest in subsidiary, net of cash acquired (2,451) (1,837) Additional contributions to the share capital of joint ventures and 10 associates (239) - 10 Dividends received 554 1,057 Interest received 635 473 Loans issued (2,003) - Repayment of loans receivable 3,562 - Proceeds from sale of property, plant and equipment 831 104 Other 15 (501) Net cash used in investing activities (60,951) (68,633) Financing activities Proceeds from debt 78,535 21,206 Repayment of debt (34,126) (26,691) Repayment of lease liabilities (3,058) - Interest paid (6,399) (6,890) 21 Dividends paid (23,905) (15,604) Bank commissions paid (196) (375) Purchase of non-controlling interest (300) - Net cash from/(used in) financing activities 10,551 (28,354) Effect of exchange rate changes on cash and cash equivalents (665) 1,668 Net increase/(decrease) in cash and cash equivalents 4,142 (24,674) Cash and cash equivalents, at the beginning of the reporting 14,783 48,456 Cash and cash equivalents, at the end of the reporting period 18,925 23,782

The accompanying notes on pages 6 to 24 are an integral part of this consolidated interim condensed financial information

3 F-7 PJSC SIBUR HOLDING CONSOLIDATED INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY (unaudited)

(In millions of Russian rubles, unless otherwise stated)

Attributable to the shareholders of the parent company Equity- settled Non- share-based control- Share Share payment Retained ling Total Notes capital premium plans earnings Total interest equity Balance as of 1 January 2018 21,784 9,357 32,450 388,515 452,106 5,052 457,158 Effect of transition to IFRS 15 - - - (425) (425) - (425) Balance as of 1 January 2018, restated 21,784 9,357 32,450 388,090 451,681 5,052 456,733 Profit for the reporting period - - - 44,069 44,069 1,799 45,868 Total comprehensive income for the reporting period - - - 44,069 44,069 1,799 45,868 Deconsolidation of subsidiary - - - - - (99) (99) 21 Dividends - - - (14,705) (14,705) (899) (15,604) Balance as of

30 June 2018 21,784 9,357 32,450 417,454 481,045 5,853 486,898

Balance as of

1 January 2019 21,784 9,357 32,450 468,879 532,470 7,994 540,464 Profit for the reporting period - - - 76,201 76,201 1,407 77,608 Total comprehensive income for the reporting period - - - 76,201 76,201 1,407 77,608 Transactions with non-controlling 21 interest - - - (296) (296) (4) (300) 21 Dividends - - - (22,787) (22,787) (1,118) (23,905) Balance as of 30 June 2019 21,784 9,357 32,450 521,997 585,588 8,279 593,867

The accompanying notes on pages 6 to 24 are an integral part of this consolidated interim condensed financial information

4 F-8 PJSC SIBUR HOLDING CONSOLIDATED INTERIM CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

(In millions of Russian rubles, unless otherwise stated)

Three months ended Six months ended 30 June 30 June 2019 2018 2019 2018 Profit for the reporting period 31,588 19,034 77,608 45,868 Total comprehensive income for the reporting period 31,588 19,034 77,608 45,868 Total comprehensive income for the reporting period, including attributable to: 31,588 19,034 77,608 45,868 Non-controlling interest 1,067 1,132 1,407 1,799 Shareholders of the parent company 30,521 17,902 76,201 44,069

The accompanying notes on pages 6 to 24 are an integral part of this consolidated interim condensed financial information

5 F-9 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

1 NATURE OF OPERATIONS

PJSC SIBUR Holding (the “Company”) and its subsidiaries (jointly referred to as the “Group”) form a vertically integrated petrochemical business. The Group purchases and processes raw materials (primarily associated petroleum gas and natural gas liquids), and produces and markets energy and petrochemical products, both domestically and internationally. The Group’s production facilities are located in the Russian Federation.

2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The preparation of consolidated interim condensed financial information requires the use of certain accounting estimates which, by definition, may differ from actual results. Estimates and judgements are continually evaluated; revisions of estimates are recognized prospectively. It also requires management to exercise judgement when applying the Group’s accounting policies.

The critical accounting estimates and judgements in applying accounting policies of the Group are consistent with those disclosed in the Group’s consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as of and for the year ended 31 December 2018, except for those which were reassessed after adoption of the new standard IFRS 16 “Leases” (see Note 27).

3 REVENUE

Revenue by products and reportable segments is presented below:

Three months ended 30 June Six months ended 30 June 2019 2018 2019 2018 Midstream 55,521 56,446 114,706 106,526 Liquefied petroleum gas 32,650 36,429 69,725 67,789 Natural gas 12,248 11,663 24,724 23,528 Naphtha 10,030 7,857 19,120 14,185 Other sales 593 497 1,137 1,024 Olefins and Polyolefins 25,385 25,390 49,121 48,189 Polyolefins 17,571 17,673 33,484 33,569 BOPP films 4,739 4,740 9,406 8,919 Olefins 1,782 1,549 3,595 3,265 Other polymers products 1,002 1,211 2,079 2,051 Other sales 291 217 557 385 Plastics, Elastomers and Intermediates 40,838 41,807 79,049 78,151 Elastomers 14,487 13,876 28,987 25,986 Plastics and organic synthesis products 14,295 14,261 27,486 27,227 Intermediates and other chemicals 5,676 5,329 11,093 11,262 MTBE and fuel additives 6,074 8,060 10,869 13,091 Other sales 306 281 614 585 Unallocated 13,649 13,959 23,403 24,828 Revenue from project management and construction services 10,480 10,373 16,548 17,348 Other revenue 3,169 3,586 6,855 7,480 Total revenue 135,393 137,602 266,279 257,694

The amount of revenue recognized over time except for revenue from construction services recognized over time (separately disclosed in Note 7) for the three-month periods ended 30 June 2019 and 30 June 2018 equals to RUB 7,315 and RUB 4,718, respectively, for the six-month periods ended 30 June 2019 and 30 June 2018 equals to RUB 13,343 and RUB 9,051, respectively.

F-10 6 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

4 OPERATING EXPENSES Three months ended Six months ended

30 June 30 June 2019 2018 2019 2018 Feedstock and materials 31,062 29,359 62,841 55,989 Transportation and logistics 20,264 17,848 39,718 35,354 Staff costs 11,696 11,251 24,490 22,273 Energy and utilities 10,215 9,534 21,424 19,696 Depreciation and amortization 9,528 8,668 19,273 17,595 Services provided by third parties 8,087 7,598 12,661 12,508 Goods for resale 5,665 7,751 11,120 14,490 Repairs and maintenance 2,579 3,956 3,801 5,702 Processing services of third parties 933 919 1,897 1,877 Taxes other than income tax 774 1,030 1,550 1,989 Marketing and advertising 394 446 717 597 Charity and sponsorship 157 259 318 411 Rent expenses 5 349 139 775 Impairment/(reversal of impairment) of property, plant and equipment - (2) 112 (17) (Gain)/loss on disposal of property, plant and equipment (25) 67 (39) 131 Change in WIP and refined products balances 1,305 (1,063) (1,169) (4,445) Other 327 1,371 695 1,159 Total operating expenses 102,966 99,341 199,548 186,084

5 FINANCE INCOME AND EXPENSES Three months ended Six months ended 30 June 30 June 2019 2018 2019 2018 Foreign exchange gain from financing activities 6,032 - 27,011 - Foreign exchange gain from non-financing activities 289 - 1,258 - Interest income 254 182 478 615 Other income 87 102 138 271 Total finance income 6,662 284 28,885 886 Interest expense (820) (82) (1,717) (494) Unwinding of discount on non-current accounts payable (310) (314) (637) (651) Bank commissions (9) (12) (21) (25) Foreign exchange loss from financing activities - (13,748) - (11,878) Foreign exchange loss from non-financing activities - (63) - (1,501) Other expense (24) (68) (161) (87) Total finance expenses (1,163) (14,287) (2,536) (14,636)

6 SEGMENT INFORMATION

The Group operates as a vertically integrated business, gathering and processing hydrocarbon feedstock, obtained from major Russian oil and gas companies, and producing and selling a wide range of petrochemical products as well as energy products.

The Group’s chief operating decision-makers are the Chairman of the Management Board, the Chief Executive Officer, the Chief Financial Officer and three Executive Directors. These executives regularly review the Group’s internal reporting in order to assess performance and allocate resources.

F-11 7 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

6 SEGMENT INFORMATION (СONTINUED)

The Group’s management determines three operating and reportable segments:

 Midstream – processing of associated petroleum gas and raw natural gas liquids to produce energy products, natural gas, liquefied petroleum gases and naphtha, which are used as feedstock by the Olefins and Polyolefins segment and the Plastics, Elastomers and Intermediates segment and also marketed and sold externally;  Olefins and Polyolefins – mainly the production of polypropylene, polyethylene, propylene, ethylene and BOPP films;  Plastics, Elastomers and Intermediates – the production of synthetic rubbers, plastics, organic synthesis products and other petrochemical products. In addition, the Plastics, Elastomers and Intermediates segment produces fuel additives, including MTBE, which is fully sold externally.

The Group’s management assesses the performance of each operating segment based on their respective EBITDA contributions. The results from providing electricity and heat supply, transportation to third parties, managerial services are not allocated into the operating segments.

EBITDA is calculated as the profit or loss for the period, adjusted by income tax expense, finance income and expenses, share of net income of joint ventures and associates, depreciation and amortization, impairment of property, plant and equipment, profit or loss on disposal of investments, as well as other one-off items.

To reflect and assess the results of the joint ventures and associates the Group’s EBITDA was adjusted by the Group’s portion of the EBITDA (calculated in accordance with the methodology as above) of joint ventures and associates (Adjusted EBITDA).

Starting fourth quarter 2018 Adjusted EBITDA is calculated by the management net of NCI share of related subsidiaries’ EBITDA. Figures for 2018 were adjusted accordingly.

Inter-segment transfers include transfers of raw materials, goods and services from one segment to another, amount is determined based on the market prices for similar goods.

Other information provided to management, except as noted below, is measured in a manner consistent with that in this consolidated interim condensed financial information.

Olefins Plastics, Total Mid- and Poly- Elastomers and reportable stream olefins Intermediates segments Unallocated Total Three months ended 1 1 1 1 1 1 30 June 2019 Total segment revenue 66,419 32,385 41,591 140,395 14,204 154,599 Inter-segment transfers (10,898) (7,000) (753) (18,651) (555) (19,206) External revenue 55,521 25,385 40,838 121,744 13,649 135,393 EBITDA 27,660 12,395 5,158 45,213 (3,258) 41,955

Adjusted EBITDA 27,811 14,872 5,108 47,791 (3,217) 44,574 Three months ended 1 1 1 1 1 1 30 June 2018 Total segment revenue 66,672 30,501 42,554 139,727 14,431 154,158 Inter-segment transfers (10,226) (5,111) (747) (16,084) (472) (16,556) External revenue 56,446 25,390 41,807 123,643 13,959 137,602 EBITDA 28,495 9,289 9,459 47,243 (316) 46,927

Adjusted EBITDA 28,663 11,490 9,402 49,555 (1,708) 47,847

F-12 8 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

6 SEGMENT INFORMATION (СONTINUED)

Olefins Plastics, Total Mid- and Poly- Elastomers and reportable stream olefins Intermediates segments Unallocated Total Six months ended

30 June 2019 Total segment revenue 134,706 62,682 80,333 277,721 24,440 302,161 Inter-segment transfers (20,000) (13,561) (1,284) (34,845) (1,037) (35,882) External revenue 114,706 49,121 79,049 242,876 23,403 266,279 EBITDA 56,232 22,649 10,774 89,655 (3,539) 86,116

Adjusted EBITDA 56,543 27,430 10,681 94,654 (2,408) 92,246 Six months ended

30 June 2018 Total segment revenue 130,438 60,653 79,584 270,675 25,567 296,242 Inter-segment transfers (23,912) (12,464) (1,433) (37,809) (739) (38,548) External revenue 106,526 48,189 78,151 232,866 24,828 257,694 EBITDA 55,138 18,988 15,984 90,110 (922) 89,188

Adjusted EBITDA 55,472 23,212 15,873 94,557 (3,009) 91,548

For the six-month periods ended 30 June 2019 and 30 June 2018, EBITDA in US dollars measured at the weighted average exchange rate of the US dollar against the Russian ruble, calculated for corresponding periods (see Note 27), was USD 1,318 million and USD 1,503 million, respectively.

A reconciliation of EBITDA to profit before income tax was as follows:

Three months ended Six months ended 30 June 30 June 2019 2018 2019 2018 EBITDA 41,955 46,927 86,116 89,188 Finance income 6,662 284 28,885 886 Finance expenses (1,163) (14,287) (2,536) (14,636) Share of net income of joint ventures and associates 1,504 853 3,723 1,462 Depreciation and amortization (9,528) (8,668) (19,273) (17,595) (Impairment)/reversal of impairment of property, plant and equipment - 2 (112) 17 Profit before income tax 39,430 25,111 96,803 59,322

Geographical information

The breakdown of revenues by geographical regions was as follows: Three months ended Six months ended

30 June 30 June 2019 2018 2019 2018 Russia 77,673 78,668 150,538 148,872 Europe 40,202 45,392 82,256 81,316 Asia 9,685 6,113 17,214 12,837 CIS 7,092 6,350 12,699 12,109 Other 741 1,079 3,572 2,560 Total revenue 135,393 137,602 266,279 257,694

F-13 9 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

7 CONTRACTS ON CONSTRUCTION SERVICES

The Group’s financial position with respect to contracts on construction services in progress as of 30 June 2019 and 31 December 2018 was as follows:

30 June 2019 31 December 2018 Construction service revenue 37,799 33,216 Less: Progress billings (39,851) (33,472) Advances from customers (4,788) (6,672) Contract liabilities (6,840) (6,928)

30 June 2019 31 December 2018 Construction service revenue 6,637 3,635 Less: Progress billings (5,591) (3,034) Advances from customers (164) (137) Contract assets 882 464

For the three-month periods ended 30 June 2019 and 30 June 2018, the Group recognized revenue from the application of the input method by reference to costs incurred of RUB 5,604 and RUB 7,519, respectively, for the six-month periods ended 30 June 2019 and 30 June 2018, the Group recognized revenue from the application of the input method by reference to costs incurred of RUB 7,586 and RUB 11,202, respectively.

In the first half of 2019 the Group has updated costs to complete for certain its contracts. The resulted decrease in revenue was accounted for prospectively in the consolidated interim condensed statement of profit or loss.

F-14 10 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

8 PROPERTY, PLANT AND EQUIPMENT

Movements in the net book value of property, plant and equipment were as follows:

Machinery Assets and under Buildings Facilities equipment Transport construction Other Total Net book value as of 1 January 2018 52,013 141,112 95,020 6,048 304,678 6,444 605,315 Depreciation charge (1,403) (5,371) (7,505) (251) - (695) (15,225) Additions - - - - 91,378 4,770 96,148 Transfers 481 923 1,816 78 (3,455) 157 - Reversal of impairment - - - - 17 - 17 Disposals (312) (57) (239) - (94) (93) (795) Reclassification to assets held for sale - - - (4,398) - - (4,398) Historical cost as of 30 June 2018 65,512 192,840 173,018 3,387 392,524 15,784 843,065 Accumulated depreciation (14,733) (56,233) (83,926) (1,910) - (5,201) (162,003) Net book value as of 30 June 2018 50,779 136,607 89,092 1,477 392,524 10,583 681,062

Net book value as of 1 January 2019 51,353 134,826 85,280 1,366 486,735 9,749 769,309 Depreciation charge (1,397) (5,161) (6,923) (88) - (1,025) (14,594) Additions - - - - 70,145 5,355 75,500 Transfers 1,107 1,838 4,774 50 (8,265) 496 - Impairment - - (56) - (56) - (112) Disposals (323) (2) (142) (96) (136) (1,075) (1,774) Historical cost as of 30 June 2019 68,023 197,275 175,373 3,017 548,423 18,243 1,010,354 Accumulated depreciation (17,283) (65,774) (92,440) (1,785) - (4,743) (182,025) Net book value as of 30 June 2019 50,740 131,501 82,933 1,232 548,423 13,500 828,329

For the three-month periods ended 30 June 2019 and 30 June 2018, the Group capitalized borrowing costs of RUB 3,577 and RUB 8,292, respectively, for the six-month periods ended 30 June 2019 and 30 June 2018, the Group capitalized borrowing costs of RUB 6,868 and RUB 12,913, respectively. Borrowing costs included foreign exchange losses in the amount of RUB nil and RUB 4,680 for the respective three-month periods and RUB nil and RUB 6,337 for the respective six-month periods. The annual capitalization rates, excluding the effect of capitalized foreign exchange losses from financing activities, were 7.48 percent and 5.90 percent, respectively.

As of 30 June 2018 the Group classified its own tanks for LPG transportation in the amount of RUB 4,398 as assets held for sale.

The Group is implementing ZapSibNeftekhim (“ZapSib”) investment project, construction of the ethylene cracking unit and polymers production units located in Tobolsk, Tyumen Region. The mechanical completion is to be attained by the end of 2019.

F-15 11 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

9 RIGHT-OF-USE ASSETS

Movements in the net book value of right-of-use assets were as follows:

Transport Other Total Net book value as of 1 January 2019 16,467 4,671 21,138 Depreciation charge (2,078) (489) (2,567) Additions - 89 89 Historical cost as of 30 June 2019 16,467 4,760 21,227 Accumulated depreciation (2,078) (489) (2,567) Net book value as of 30 June 2019 14,389 4,271 18,660

The majority of the Group’s right-of-use assets are represented by lease contracts of shipping vessels that the Group uses to transport its produced goods to customers. Vessels can be used in geographic areas, which are specified in the contracts, within a predetermined period between dry-docking.

10 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

Country of Interest held incorporation (percent) 30 June 2019 31 December 2018 RusVinyl LLC Russia 50 21,702 19,598 Yuzhno-Priobsky GPP LLC Russia 50 6,085 6,100 Reliance Sibur Elastomers Private Limited India 25.1 3,967 4,084 JSC Sibgazpolimer* Russia 50 3,794 3,061 NPP Neftekhimia LLC Russia 50 2,517 2,470 PTC LLC Russia 50 743 477 LNG NOVAENGINEERING LLC Russia 50.1 62 62 SNHK LLC Russia 50 1 1 Total investments in joint ventures and associates 38,871 35,853

* Special purpose vehicle established for investing in production entities.

The voting and ownership percentage in joint ventures and associates are the same except LNG NOVAENGINEERING LLC.

RusVinyl LLC. The Group issued a guarantee (liquidity support undertaking - LSU), and pledged its shares in RusVinyl LLC as a security. As of 30 June 2019 and 31 December 2018, the amount of LSU was equal to EUR 62.5 million and the maximum credit risk exposures due to guarantees issued were RUB 4,489 and RUB 4,966, respectively.

Further details were provided in the annual consolidated financial statements as of and for the year ended 31 December 2018.

F-16 12 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

11 TRADE AND OTHER RECEIVABLES

30 June 2019 31 December 2018 Receivables under project management and construction services 48,980 32,552 Trade receivables 15,704 15,721 Other receivables 2,509 3,512 Total trade and other receivables 67,193 51,785 Less non-current portion: Receivables under project management and construction services (8,858) (5,336) Other receivables (1,017) (1,240) 57,318 45,209

12 INVENTORIES

30 June 2019 31 December 2018 Refined products and work in progress 22,616 22,433 Materials and supplies 20,436 16,386 Goods for resale 1,504 1,648 Total inventories 44,556 40,467

13 PREPAYMENTS AND OTHER CURRENT ASSETS

30 June 2019 31 December 2018 Non-financial assets VAT receivable 11,615 12,461 Prepayments and advances to suppliers 5,659 6,394 Recoverable VAT 4,769 3,170 Other prepaid taxes and custom duties 2,115 1,408 Prepaid excise 1,456 1,294 Recoverable excise 1,087 758 Other current assets 481 1,023 Total non-financial assets 27,182 26,508 Financial assets Other financial assets 136 112 Total financial assets 136 112 Total prepayments and other current assets 27,318 26,620

F-17 13 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

14 LONG-TERM DEBT EXCLUDING RELATED TO ZAPSIBNEFTEKHIM

Long-term debt payable to Currency Due 30 June 2019 31 December 2018 Variable rate Bank GPB RUB 2023 22,000 22,000 Alfa-Bank RUB 2020 10,000 - Alfa-Bank USD 2020 6,307 - Raiffeisen Bank USD 2021 3,784 - Citibank USD 2021 631 695 ING Bank Group EUR 2011-2021 206 285 Deutsche Bank EUR 2014-2019 - 4,274 UniCredit Bank EUR 2013-2019 - 253 Fixed rate Russian ruble bonds RUB 2019-2021 30,000 30,000 Eurobonds 2023 USD 2023 19,334 21,285 UniCredit Bank Group RUB 2022 4,984 4,980 Monotowns Development Fund RUB 2021-2026 1,000 1,000 Total long-term debt excluding related to ZapSibNeftekhim 98,246 84,772 Less: current portion (20,103) (11,435) 78,143 73,337

The Group had no subordinated debt and no debts that may be converted into an equity interest in the Group.

The scheduled maturities of long-term debt excluding related to the ZapSib as of 30 June 2019 and 31 December 2018 are presented below:

30 June 2019 31 December 2018 Due for repayment: Between one and two years 30,195 11,181 Between two and five years 47,449 61,584 More than five years 499 572 Total long-term debt excluding related to ZapSibNeftekhim 78,143 73,337

The carrying amounts of long-term fixed-rate borrowings approximate their fair value as of 30 June 2019 and 31 December 2018, except for those, which fair value is disclosed in Note 25.

The carrying amounts of long-term debts with variable interest rates linked to LIBOR, EURIBOR or the Central Bank of Russia key interest rate approximate their fair value.

As of 30 June 2019 and 31 December 2018, the Group had the following committed long-term credit facilities excluding related to the ZapSib:

Credit limit Undrawn amount As of 30 June 2019 USD-denominated (in millions of USD) 200 200 RUB-denominated (in millions of RUB) 10,000 10,000 As of 31 December 2018 USD-denominated (in millions of USD) 200 200 RUB-denominated (in millions of RUB) 10,000 10,000

As of 30 June 2019 and 31 December 2018, the total ruble equivalent of the Group’s undrawn committed long-term credit facilities excluding related to the ZapSib was RUB 22,615 and RUB 23,894, respectively.

F-18 14 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

15 LONG-TERM ZAPSIBNEFTEKHIM RELATED DEBT

Long-term debt payable to Currency Due 30 June 2019 31 December 2018 Variable rate National Wealth Fund financing USD 2030 110,382 121,574 Deutsche Bank (ECA financing) EUR 2020-2029 81,697 78,380 New Development Bank USD 2021-2028 3,775 - ING Bank Group (ECA financing) EUR 2013-2029 2,808 2,705 Fixed rate Vnesheconombank USD 2021-2025 25,072 16,564 Credit Agricole (ECA financing) EUR 2019-2029 19,761 13,293 Russian Direct Investment Fund USD 2018-2020 8,362 13,258 Total long-term ZapSibNeftekhim related debt 251,857 245,774 Less: current portion (12,907) (8,834) 238,950 236,940

The scheduled maturities of long-term ZapSib related debt as of 30 June 2019 and 31 December 2018 are presented below:

30 June 2019 31 December 2018 Due for repayment: Between one and two years 12,318 15,587 Between two and five years 49,410 37,212 Between five and ten years 62,614 53,920 More than ten years 114,608 130,221 Total long-term ZapSibNeftekhim related debt 238,950 236,940

The carrying amounts of long-term fixed-rate borrowings approximate their fair value as of 30 June 2019 and 31 December 2018, except for those, which fair value is disclosed in Note 25.

The carrying amounts of long-term debt with variable interest rates linked to LIBOR, EURIBOR or USA CPI approximate their fair value.

As of 30 June 2019 and 31 December 2018, the Group had the following committed long-term ZapSib related credit facilities:

Credit limit Undrawn amount As of 30 June 2019 USD-denominated (in millions of USD) 300 240 As of 31 December 2018 EUR-denominated (in millions of EUR) 2,151 902

As of 30 June 2019 and 31 December 2018, the total ruble equivalent of the Group’s undrawn committed long-term ZapSib related credit facilities was RUB 15,138 and RUB 71,684, respectively. As of 30 June 2019, the total ruble equivalent of the Group’s undrawn committed short-term ZapSib related credit facilities was RUB 36,425 (RUB 11,115 as of 31 December 2018).

Total Group’s long-term debt both related and excluding related to the ZapSib bore the following weighted average interest rates: RUB-denominated of 9.0 percent and 9.2 percent as of 30 June 2019 and 31 December 2018, respectively; USD-denominated of 3.7 percent and 4.0 percent as of 30 June 2019 and 31 December 2018, respectively; and EUR-denominated of 1.2 percent and 1.1 percent as of 30 June 2019 and 31 December 2018, respectively.

F-19 15 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

16 DEFERRED INCOME FROM GRANTS AND SUBSIDIES

2019 2018 Deferred income from grants and subsidies as of 1 January 55,335 48,720 Grants and subsidies received 5,850 2,420 Recognized in profit or loss (depreciation) (1,494) (1,735) Deferred income from grants and subsidies as of 30 June 59,691 49,405

17 OTHER NON-CURRENT LIABILITIES

30 June 2019 31 December 2018 Financial liabilities Payables under project management and construction services 8,328 4,253 Payables under accommodation program 3,129 3,034 Payables for acquisition of subsidiaries 2,587 3,523 Payables to contractors and suppliers of property, plant and equipment 767 1,279 Trade payables - 50 Other liabilities 8 8 Total financial non-current liabilities 14,819 12,147 Non-financial liabilities Post-employment obligations 2,077 2,077 Payables to employees 1,787 1,661 Total non-financial non-current liabilities 3,864 3,738 Total other non-current liabilities 18,683 15,885

18 TRADE AND OTHER PAYABLES

30 June 2019 31 December 2018 Financial liabilities Payables under project management and construction services 39,231 28,231 Payables to contractors and suppliers of property, plant and equipment 34,518 44,210 Trade payables 23,290 25,675 Payables for acquisition of subsidiaries 2,142 3,280 Interest payable 1,845 1,863 Other payables 1,124 825 Total financial trade and other payables 102,150 104,084 Non-financial liabilities Payables to employees 9,571 9,650 Advances from customers 4,633 4,958 Other payables 1,305 1,196 Total non-financial trade and other payables 15,509 15,804 Total trade and other payables 117,659 119,888

As of 30 June 2019 and 31 December 2018, payables to employees included provisions for annual and other bonuses, vacation accruals (including social taxes) of RUB 8,118 and RUB 9,623, respectively.

F-20 16 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

19 SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT EXCLUDING RELATED TO ZAPSIBNEFTEKHIM

30 June 2019 31 December 2018 Short-term debt: RUB-denominated debt - 1,865 Total short-term debt - 1,865 Current portion of long-term debt excluding related to ZapSibNeftekhim (Note 14): Russian ruble bonds 20,000 10,000 Others 103 1,435 Total 20,103 13,300

As of 30 June 2019 and 31 December 2018, the Group had committed short-term credit facilities excluding related to the ZapSib in euro and rubles. As of 30 June 2019 and 31 December 2018, the total ruble equivalents of the Group’s undrawn committed short-term credit facilities excluding related to the ZapSib were RUB 15,836 and RUB 27,084, respectively.

20 TAXES OTHER THAN INCOME TAX PAYABLE

30 June 2019 31 December 2018 VAT 6,508 9,130 Property tax 783 1,009 Social taxes 714 494 Other taxes 1,045 291 Total taxes other than income tax payable 9,050 10,924

21 SHAREHOLDERS’ EQUITY

As of 30 June 2019 and 31 December 2018, the Group didn’t have direct parent company and an ultimate controlling shareholder.

Earnings per share. There were no events that would trigger dilution of earnings per share for the six- month periods ended 30 June 2019 and 30 June 2018.

Dividends. Dividends in the amount of RUB 23,905 and RUB 15,604 were paid during the six-month periods ended 30 June 2019 and 30 June 2018, respectively.

During the six-month period ended 30 June 2019 the Group’s subsidiary NIPIGAS distributed dividends for 2018 financial year.

Transactions with non-controlling interest. In February 2019, the Group acquired a 33,3 percent non- controlling interest in Plastic-Geosintetika LLC for a cash consideration of RUB 300. As a result, the Group became the sole owner of Plastic-Geosintetika LLC. The difference between the consideration paid and the non-controlling interest acquired was recognized in retained earnings.

22 INCOME TAX

For the six-month periods ended 30 June 2019 and 30 June 2018, the Group accrued current income tax of RUB 17,675 and RUB 12,199, respectively.

Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year adjusted for non-recurring items.

F-21 17 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

23 CASH GENERATED FROM OPERATIONS AND NET DEBT RECONCILIATION Six months ended 30 June Notes 2019 2018 Profit before income tax 96,803 59,322 Adjustments to profit before income tax 4 Depreciation and amortization 19,273 17,595 Foreign exchange (gain)/loss from investing and financing activities, net (27,829) 11,630 5 Unwinding of discount on non-current accounts payable 637 651 5 Interest expense 1,717 494 (Reversal)/accrual of provision for legal cases (107) 192 4 (Gain)/loss on disposal of property, plant and equipment (39) 131 5 Bank commissions 21 25 Impairment of trade and other receivables 63 6 Impairment/(reversal of impairment) of property, plant and 4 equipment 112 (17) Unwinding of discount on loans receivable and non-current 5 accounts receivable (87) (49) 5 Interest income (478) (615) 17, 18 Change in provision for bonuses (1,379) (806) 10 Share of net income of joint ventures and associates (3,723) (1,462) Other adjustments (63) (53) Operating cash flows before working capital changes 84,921 87,044 Changes in working capital Increase in advances received under project management and construction services 5,292 28,258 Increase in trade and other payables 13,832 7,449 Decrease in taxes payable (1,680) (1,238) Increase in trade and other receivables (15,676) (7,356) (Increase)/decrease in prepayments and other current assets (1,443) 3,903 Increase in inventories (4,155) (7,148) Increase in advances issued under project management and construction services (5,669) (29,469) Total changes in working capital (9,499) (5,601) Cash generated from operating activities before income tax payment 75,422 81,443 Income tax paid (20,215) (10,798) Net cash from operating activities 55,207 70,645

For the six-month periods ended 30 June 2019 and 30 June 2018, the reconciliation of net debt was as follows:

Cash and cash Long-term and Long-term and short- Net debt equivalents short-term debt term lease liabilities As of 1 January 2018 48,456 (312,344) - (263,888) Cash flows (26,342) 5,485 - (20,857) Foreign exchange adjustments 1,668 (18,729) - (17,061) Other non-cash movements - 57 - 57 As of 30 June 2018 23,782 (325,531) - (301,749)

As of 1 January 2019 14,783 (332,411) (21,138) (338,766) Cash flows 4,807 (44,409) 3,058 (36,544) Foreign exchange adjustments (665) 26,163 1,479 26,977 Other non-cash movements - 554 (887) (333) As of 30 June 2019 18,925 (350,103) (17,489) (348,667)

F-22 18 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

24 RELATED PARTIES

For the purposes of this consolidated interim condensed financial information, parties are generally considered to be related if the party is part of the Group’s key management or the Board of Directors; the party has the ability to control or jointly control the other party; both parties are under common control; or one party can exercise significant influence over the other party in the financial and operational decision-making process. In considering each possible related-party relationship, the Group’s management pays attention to the substance of the relationship, and not merely the entities’ legal form. Also, management applies judgement to decide whether party could exercise significant influence over the Group, considering not merely percentage of shareholding in the Group and governing bodies representation, but actual ability and participation in the Group's decision making.

The nature of the related-party relationships for those related parties with whom the Group entered into significant transactions during the six-month periods ended 30 June 2019 and 30 June 2018, or had significant balances outstanding as of 30 June 2019 and 31 December 2018, are presented below. a) Significant transactions with parties under the control or joint control of PROMSTROI GROUP

The Group had the following transactions with PROMSTROI GROUP for the reporting periods ended 30 June 2019 and 30 June 2018:

Three months ended Six months ended 30 June 30 June 2019 2018 2019 2018 Operating and investing activities Purchases of construction services (2,943) (4,574) (4,757) (6,843) Sales of materials - 15 15 80

As of 30 June 2019 and 31 December 2018, the Group had the following balances with PROMSTROI GROUP:

30 June 2019 31 December 2018 Trade and other receivables 37 60 Prepayments and advances to suppliers 555 857 Advances and prepayments for capital construction 1,033 2,144 Accounts payable to contractors and suppliers of property, plant and equipment 579 201 Trade and other payables 195 1,290

b) Remuneration of directors and key management

During the six-month period ended 30 June 2019 the Company’s Board of Directors comprised twelve individuals (in January – March 2018 comprised eleven individuals and since April 2018 comprised twelve individuals), including shareholder representatives. Members of the Board of Directors are entitled to annual compensation, as approved by the Annual General Shareholders’ Meeting.

During the three-month periods ended 30 June 2019 and 30 June 2018, the Company accrued RUB 26 and RUB 31, respectively, during the six-month periods ended 30 June 2019 and 30 June 2018, the Company accrued RUB 51 and RUB 56 net of social taxes, respectively, to Board of Directors members as part of their compensation for the years 2019 and 2018.

F-23 19 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

24 RELATED PARTIES (СONTINUED)

During the six-month periods ended 30 June 2019 and 30 June 2018, the number of key management personnel comprised 16 individuals. Key management personnel is entitled to salaries, bonuses, voluntary medical insurance and other employee benefits. Remuneration of key management personnel is determined by the terms set out in the relevant employment contracts and is substantially linked to the financial performance of the Group. Remuneration of key management personnel amounted to RUB 433 and RUB 531 net of social taxes for the three-month periods ended 30 June 2019 and 30 June 2018 respectively, and RUB 1,415 and RUB 942 net of social taxes for the six-month periods ended 30 June 2019 and 30 June 2018, respectively. c) Joint ventures

The Group had the following transactions with its joint ventures for the six-month periods ended 30 June 2019 and 30 June 2018:

Three months ended Six months ended

30 June 30 June 2019 2018 2019 2018 Operating and investing activities Purchases of materials, goods and services (10,536) (2,612) (18,701) (4,923) Purchases of processing services (226) (230) (468) (457) Sales of materials, goods and services 3,628 2,614 7,080 5,156

As of 30 June 2019 and 31 December 2018, the Group had the following balances with its joint ventures:

30 June 2019 31 December 2018 Trade and other receivables 1,853 1,561 Loans receivable 312 1,878 Trade and other payables 3,429 3,030

The Group provided and received loans to and from its joint ventures on the market terms.

25 FAIR VALUE OF FINANCIAL INSTRUMENTS

Recurring fair value measurements

Recurring fair value measurements are those that are required or permitted under the relevant accounting standards in the consolidated statement of financial position at the end of each reporting period. a) Financial instruments carried at fair value

Contingent and deferred considerations for the purchase of Tobolsk HPP LLC. In February 2016, the Group recognized a contingent consideration in the amount of RUB 585 as a financial liability within other non-current liabilities in the consolidated statement of financial position as a part of the total purchase consideration for the acquisition of its subsidiary Tobolsk HPP LLC (“Tobolsk HPP”).

F-24 20 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

25 FAIR VALUE OF FINANCIAL INSTRUMENTS (СONTINUED)

Also, the Company should reimburse for all Tobolsk HPP cash inflows under its capacity supply contracts, which are specific to this industry revenue stream, guaranteed by the legislation of the Russian Federation, as the recovery of capital investments. Such reimbursements are payable on a monthly basis from the date of acquisition until 2020. During the three-month periods ended 30 June 2019 and 30 June 2018, the Company reimbursed cash inflows under its capacity supply contracts in the amount of RUB 478 and RUB 492, respectively, during the six-month periods ended 30 June 2019 and 30 June 2018, the Company reimbursed cash inflows under its capacity supply contracts in the amount of RUB 1,031 and RUB 1,069, respectively.

The fair value of these financial instruments was determined using Level 3 measurements. For contingent consideration the sum of potential outcomes determined for different scenarios in which the Group realises synergies from integrating Tobolsk HPP into its production site infrastructure in Tobolsk, multiplied by the probability of each scenario. As of 30 June 2019 and 31 December 2018, the fair value of this contingent consideration was assessed as RUB 1,931 and RUB 2,016, respectively. As of 30 June 2019 the Group made first payout of the contingent consideration in the amount of RUB 211. The fair value of liability under capacity supply contracts was assessed based on the estimated future cash flows under the relevant capacity supply contracts discounted by the market interest rate for similar type of liabilities and amounting to RUB 2,737 and RUB 3,571 as of 30 June 2019 and 31 December 2018, respectively. The unwinding of discount on these liabilities amounting to RUB 143 and RUB 209 was recognized as a financial expense in the consolidated interim condensed statement of profit or loss for the three-month periods ended 30 June 2019 and 30 June 2018, respectively, and RUB 323 and RUB 422 was recognized as a financial expense in the consolidated interim condensed statement of profit or loss for the six-month periods ended 30 June 2019 and 30 June 2018, respectively. b) Assets and liabilities not measured at fair value but for which fair value is disclosed

Liabilities carried at amortised cost. As of 30 June 2019 and 31 December 2018, the fair value of the Eurobonds 2023 (see Note 14) was RUB 20,029 and RUB 20,794, respectively. It was calculated based on Level 1 measurements such as quoted market prices. The fair values of other long-term and short- term debt carried at amortised cost were determined using valuation techniques. The estimated fair value of variable interest rate instruments linked to LIBOR, EURIBOR, USA CPI or the Central Bank of Russia key interest rate with stated maturity was estimated based on Level 2 measurements as expected cash flows discounted at current LIBOR, EURIBOR, USA CPI or the Central Bank of Russia key interest rate increased by the margin stipulated by the corresponding loan agreement. The estimated fair value of fixed interest rate instruments with stated maturity was estimated based on Level 3 measurements as expected cash flows discounted at current interest rates for new instruments with similar credit risk and remaining maturity. As of 30 June 2019 and 31 December 2018, the fair value of Credit Agricole Loan (see Note 15) was RUB 22,032 and RUB 14,604, respectively.

26 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS

There were no significant changes to the operating environment, in which the Group operates, legal and tax risks the Group is subject for, environmental and social commitments compared to those disclosed in the annual consolidated financial statements as of and for the year ended 31 December 2018.

Compliance with covenants. The Group is subject to certain covenants primarily related to its debt. Non-compliance with such covenants may result in negative consequences for the Group, i.e. increased borrowing costs. Management believes that the Group is in compliance with its covenants.

F-25 21 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

26 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS (СONTINUED)

Capital commitments. The Group has entered into contracts for the purchase of property, plant and equipment and construction services. As of 30 June 2019, the Group had contractual capital expenditure commitments of RUB 106,238, including RUB 93,845 related to the ZapSib (as of 31 December 2018: RUB 113,119, including RUB 105,064 related to the ZapSib), calculated as the contractual amount of construction contracts less cash paid under these contracts. The capital commitments should not be considered as binding since they can be cancelled on the sole management’s decision without any significant losses for the Group, except those liabilities, which were already recognized in the consolidated interim condensed statement of financial position.

27 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation. This consolidated interim condensed financial information has been prepared in accordance with International Accounting Standard IAS 34 “Interim Financial Reporting”. This consolidated interim condensed financial information should be read in conjunction with the Group’s consolidated financial statements as of and for the year ended 31 December 2018, prepared in accordance with IFRS and International Financial Reporting Interpretation Committee (“IFRIC”) interpretations.

Most of the Group’s companies maintain their accounting records in Russian rubles (“RUB”) and prepare their statutory financial statements in accordance with the Regulations on Accounting and Reporting of the Russian Federation (“RAR”). This consolidated interim condensed financial information is based on the statutory records of the Group’s companies, with adjustments and reclassifications recorded to ensure fair presentation in accordance with IFRS.

The principal accounting policies applied by the Group are consistent with those disclosed in the Group’s consolidated financial statements as of and for the year ended 31 December 2018, except for income tax expenses recognized based on Group management’s best estimate of the weighted average annual income tax rate expected for the full financial year (see Note 22), scheduled maintenance costs and for the changes after adoption of a new standard IFRS 16 “Leases”. Other new and amended standards and interpretations that are mandatory for annual periods beginning on or after 1 January 2019 have no material impact on the Group’s accounting policies (further information is provided in Note 28).

Leases. The Group’s adoption of IFRS 16 “Leases” from 1 January 2019 led to changes in accounting policies. The Group applied modified retrospective approach and did not restate comparatives for 2018.

Effect of the initial application of IFRS 16. The Group applied the new rules with the following practical expedients permitted by the standard:

 Existing long-term service contracts which were not classified as lease contracts under the principles of IAS 17 “Leases” and IFRIC 4 “Determining whether an Arrangement contains a Lease” were not reassessed by the new guidance regarding the definition of a lease in IFRS 16 “Leases”;  Lease contracts with a remaining lease term of 12 months or less from the date of initial application are accounted for as short-term leases and the related expenses are recognized as rent within operating expenses in the consolidated interim condensed statement of profit or loss;  A single discount rate was used to a portfolio of leases with reasonably similar characteristics, such as lease term, type of leased assets, etc. As of 1 January 2019, the weighted average incremental borrowing rate of the Group which was applied to the lease liabilities was 8.3 percent;  Non-lease components were not separated for the purpose of lease liabilities accounting as they are not material and in majority of the Group’s contracts they are not specifically predetermined;

F-26 22 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

27 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

 Initial direct costs were excluded for the measurement of right-of-use assets at the date of initial recognition as they are considered to be not material.

As of 1 January 2019, lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate applicable in relation to leases which had previously been classified as “operating leases” under the principles of IAS 17 “Leases”. On the adoption date the right-of-use assets were initially measured at the amount of lease liabilities.

The reconciliation of operating lease commitments and the amount of lease liabilities recognized as of 1 January 2019 is presented below:

1 January 2019 Operating lease commitments as of 31 December 2018 16,750 Discounted using the incremental borrowing rate at 1 January 2019 13,900 Additional lease liabilities to be recognized 2,121 Recognition exemption for short-term leases (60) Change in estimate 5,177 Lease liability 21,138

Change in estimate mainly relates to the effect of minimum lease payments remeasurement under the principles of IFRS 16 “Leases”, including those payments which are fixed by substance.

Accounting policies. Leases are recognized as right-of-use assets and corresponding lease liabilities once the leased asset is available for use by the Group (“commencement date”).

The lease liability is recognized as present value of the lease payments that were not paid at the commencement date. The lease liability is discounted using the incremental borrowing rate. After initial recognition the lease liability is measured at amortised cost and interest expense on the lease liability is recognized in consolidated interim condensed statement of profit or loss as part of finance expenses.

The right-of-use assets include the amount of initial recognition of the lease liability, any lease payments made at or before the commencement date less any lease incentives received. The right-of-use assets are subsequently measured at cost less accumulated depreciation and accumulated impairment losses (if any) in accordance with IAS 16 “Property, Plant and Equipment”. Depreciation is charged using the straight-line method to the earlier of the end of its useful life or the end of the lease term. The Group makes specific judgments, taking into account its strategic business plans, while determine lease term for those contracts which include extension or termination options.

The Group classifies cash payments for the lease liabilities within financial activities in the consolidated interim condensed statement of cash flows.

Scheduled maintenance costs. Significant expenses related to scheduled maintenance of property, plant and equipment occurred at least yearly are accounted for as part of property, plant and equipment in consolidated interim condensed statement of financial position and depreciated until the next scheduled maintenance. Since the effect of change in accounting policy is not material, no retrospective adjustment was made.

F-27 23 PJSC SIBUR HOLDING NOTES TO THE CONSOLIDATED INTERIM CONDENSED FINANCIAL INFORMATION (unaudited)

(In millions of Russian rubles, unless otherwise stated)

27 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

The official exchange rates of the US dollar (USD) and euro (EUR) against the Russian ruble (RUB), as set by the Central Bank of Russia, are as follows:

USD/RUB EUR/RUB As of 30 June 2019 63.0756 71.8179 Three-months period ended 30 June 2019 weighted average 64.5584 72.5210 Six-month period ended 30 June 2019 weighted average 65.3384 73.8389 As of 31 December 2018 69.4706 79.4605 Three-months period ended 30 June 2018 weighted average 61.7998 73.7505 Six-month period ended 30 June 2018 weighted average 59.3536 71.8223

28 NEW ACCOUNTING DEVELOPMENTS

Certain new standards and interpretations have been issued that are mandatory for annual periods beginning on or after 1 January 2019, which have not had a material impact on the Group’s financial position or operations:

 IFRIC 23 “Uncertainty over Income Tax Treatments” (issued on 7 June 2017);  Prepayment Features with Negative Compensation – Amendments to IFRS 9 (issued on 12 October 2017);  Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28 (issued on 12 October 2017);  Annual Improvements to IFRSs 2015-2017 cycle - amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on 12 December 2017);  Plan Amendment, Curtailment or Settlement - Amendments to IAS 19 (issued on 7 February 2018).

The Group is considering the implications of the following amendments, the impact on the Group and the timing of their adoption by the Group:

 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB);  IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021).

CONTACT INFO

The Group’s Head Office:

PJSC SIBUR Holding 16/1 Krzhizhanovskogo St. Moscow, GSP-7, 117997 Russia Tel./fax: +7 (495) 777 5500 Website: www.sibur.ru (Russian) www.sibur.com (English)

F-28 24 PJSC SIBUR Holding

International Financial Reporting Standards Consolidated Financial Statements and Independent Auditor’s Report

31 December 2018

F-29

Table of Contents

Independent Auditor’s Report

IFRS Consolidated Statement of Profit or Loss ...... 1 IFRS Consolidated Statement of Financial Position ...... 2 IFRS Consolidated Statement of Cash Flows ...... 3 IFRS Consolidated Statement of Changes in Equity ...... 4 IFRS Consolidated Statement of Comprehensive Income ...... 5

Notes to the IFRS Consolidated Financial Statements:

1 Nature of Operations ...... 6 2 Critical Accounting Estimates and Judgements in Applying Accounting Policies ...... 6 3 Acquisition and Deconsolidation of Subsidiaries ...... 9 4 Assets and Liabilities Classified as Held for Sale ...... 10 5 Revenue ...... 11 6 Operating Expenses ...... 12 7 Finance Income and Expenses ...... 13 8 Segment Information ...... 13 9 Contracts on Construction Services ...... 15 10 Property, Plant and Equipment ...... 16 11 Advances and Prepayments for Capital Construction ...... 16 12 Goodwill and Intangible Assets ...... 17 13 Investments in Joint Ventures and Associates ...... 18 14 Advances Issued and Received under Project Management and Construction Services ...... 23 15 Prepaid Borrowing Costs ...... 23 16 Trade and Other Receivables ...... 24 17 Inventories ...... 24 18 Prepayments and Other Current Assets ...... 25 19 Bank Deposits ...... 25 20 Cash and Cash Equivalents ...... 25 21 Long-Term Debt Excluding Related to ZapSibNeftekhim ...... 26 22 Long-Term ZapSibNeftekhim Related Debt ...... 27 23 Deferred Income from Grants and Subsidies ...... 28 24 Other Non-Current Liabilities ...... 29 25 Trade and Other Payables ...... 29 26 Short-Term Debt and Current Portion of Long-Term Debt Excluding Related to ZapSibNeftekhim ...... 30 27 Taxes Other than Income Tax Payable ...... 30 28 Shareholders’ Equity ...... 30 29 Non-Controlling Interest ...... 31 30 Income Tax ...... 32 31 Cash Generated from Operations and Net Debt Reconciliation ...... 34 32 Principal Subsidiaries ...... 35 33 Related Parties ...... 35 34 Financial Instruments and Financial Risk Factors ...... 38 35 Fair Value of Financial Instruments ...... 42 36 Commitments, Contingencies and Operating Risks ...... 43 37 Basis of Preparation and Significant Accounting Policies ...... 46 38 New Accounting Developments ...... 59 39 New Accounting Pronouncements ...... 60 Contact Info ...... 61

F-30 Independent Auditor’s Report

To the Shareholders and Board of Directors of PJSC SIBUR Holding:

Our opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of PJSC SIBUR Holding (the “Company”) and its subsidiaries (together – the “Group”) as of 31 December 2018, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). What we have audited The Group’s consolidated financial statements comprise: • the consolidated statement of profit or loss for the year ended 31 December 2018; • the consolidated statement of financial position as of 31 December 2018; • the consolidated statement of cash flows for the year then ended; • the consolidated statement of changes in equity for the year then ended; • the consolidated statement of comprehensive income for the year then ended; and • the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our audit of the consolidated financial statements in the Russian Federation. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

AO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, Russia, 125047 T: +7 (495) 967-6000, F:+7 (495) 967-6001, wwwF-31.pwc.ru Our audit approach Overview

• Overall Group materiality: Russian rubles (“RUB”) 5,000 million, which represents 2.5% of earnings before interest, taxes, Materiality depreciation and amortization (“EBITDA”). Refer to Note 8 in the consolidated financial statements.

Group • The Group has offices and operations in a number of countries. We scoping conducted audit work covering significant reporting units, which are located in two countries.

Key audit • The Group engagement team audited Group component located in matters Russia, while PwC network firm in Austria audited the Group’s foreign subsidiary in the that country.

• Business development of JSC NIPIgaspererabotka • Revenue recognition

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the consolidated financial statements as a whole.

F-32 2 Overall Group materiality RUB 5,000 million

How we determined it 2.5% of EBITDA

Rationale for the We chose to apply EBITDA as the benchmark because, in our materiality benchmark view, it is the benchmark against which the Group’s applied performance is most commonly measured. We chose 2.5%, which is within the range of acceptable quantitative materiality thresholds.

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter

Business development of Our audit procedures included review of NIPIGAS JSC NIPIgaspererabotka contracts and verification of revenue recognition Refer to Notes 2, 9 and 14 in the consolidated criteria fulfilment. financial statements We reviewed the contractual terms and the accounting policies applied by management. We reviewed documents supporting the revenue JSC NIPIgaspererabotka (“NIPIGAS”), a recognized by the Group under project Group subsidiary, provides engineering, management and construction services, procurement, construction and project arrangements with subcontractors and suppliers, management services to external customers. invoices and payment schedules, underlying We paid particular attention to NIPIGAS’s budgets, revenue and cost forecasts. We discussed operations, due to the materiality and the fact the status of the projects with management, that they differ from the Group’s core business including financial and technical experts. activity. We also reviewed the presentation of these operations in the consolidated financial statements. No significant exceptions were noted as a result of our procedures.

Revenue recognition We selected individual revenue transactions to Refer to Note 5 in the consolidated financial test whether they were appropriately recorded in statements the correct period. For selected transactions, the date of revenue recognition was traced to shipping The Group recognizes revenue from sales of documents with reference to the underlying sales goods at the point of transfer of control of contract with the customer. those goods, which is determined according to the terms of the underlying customer contract.

F-33 3

A number of revenue contracts specify separate We also verified the selected outstanding balances points of transfer of legal title and control. of trade accounts receivable at the year-end by Certain sales also require long-distance receiving confirmations from customers. shipping. As a result, the procedure to identify the moment when control of the assets is No significant exceptions were noted as a result of transferred can be complex and requires our procedures. making certain estimates. The difficulty in identifying the proper moment when control is transferred increases the risk of revenue recognition in the wrong period and may potentially lead to overstatement or understatement of revenue. We paid particular attention to revenue transactions, due to the materiality, also, under ISAs, there is a rebuttable presumption of fraud risk in revenue recognition on every audit engagement.

How we tailored our Group audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the geographic and management structure of the Group, the accounting processes and controls and the industry in which the Group operates. Considering our ultimate responsibility for the opinion on the Group’s consolidated financial statements, we are responsible for the direction, supervision and performance of the Group audit. In establishing the scope of our audit work, we determined the nature and extent of the audit procedures to be performed at the reporting units to ensure sufficient evidence has been obtained to support our opinion on the consolidated financial statements as a whole. We also determined the type of work that needed to be performed directly by us, as the Group engagement team, by the component auditor represented by the PwC network, or by another audit firm. Where the work was performed by the component auditor, we determined the level of involvement we needed to have in the audit work at this component to be able to conclude whether sufficient appropriate audit evidence was obtained as a basis for our opinion as a whole. In establishing our overall approach to the Group audit, we considered the significance of the Group components to the consolidated financial statements, our assessment of risk within each component, the overall coverage across the Group achieved by our procedures, as well as the risk associated with insignificant components not brought into the full scope of our audit. Based on the above, we determined the nature and extent of work to be performed both at the reporting units and at the Group level. Where the work was performed by a PwC network firm, we performed consolidated level oversight and detailed testing of revenue to ensure sufficient evidence has been obtained to support our opinion on the consolidated financial statements taken as a whole. Our approach to determining the scope of a Group audit is a process whereby reporting units are deemed to be within the scope for audit testing based on significant contribution or the presence of a significant risk, or to add elements of unpredictability. Based on this process, we identified locations in Russia and Austria that required full scope audit procedures or procedures over specific financial statement line items. Together, these reporting units

F-34 4

accounted for 86% of the Group’s revenue. In respect of the Group’s significant joint venture, RusVinyl LLC, the audit was performed by another audit firm under our instruction. Other information Management is responsible for the other information. The other information comprises “Management’s discussion and analysis of financial condition and results of operations” for the year ended 31 December 2018 (but does not include the consolidated financial statements and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report, and the PJSC SIBUR Holding Annual Review for the year ended 31 December 2018 and first quarter 2019 Quarterly Issuer’s Report, which is expected to be made available to us after that date. Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the PJSC SIBUR Holding Annual Review for the year ended 31 December 2018 and first quarter 2019 Quarterly Issuer’s Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

F-35 5 • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare

F-36 6 pwc

circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefitsof such communication.

The certifiedauditor responsible for the audit resultingin this independent auditor's report is T.V. Sirotinskaya.

itor Oicence no. 01-000527), AO PricewaterhouseCoopers Audit

Audited entity: PJSC SIBUR Holding Independent auditor: AO PricewaterhouseCoopers Audit

Certificate of inclusion in the Unified State Register of Legal Entities Registered by the Government Agency Moscow Registration Chamber issued on 8 July 2005 under registration NQ 1057747421247 on 28 February 1992 under No. 008.890

Block 1, No. 6, bid. 30, Eastern Industrial Park, Tobolsk, Tyumen Record made in the Unified State Register of Legal Entities on Region, Russian Federation, 626150 22 August 2002 under State Registration Number 1027700148431

Member of Self-regulated organization of auditors «Russian Union of auditors• (Association)

Principal Registration Number of the Record in the Register of Auditors and Audit Organizations - u603050547

7 F-37 F-38 PJSC SIBUR HOLDING IFRS CONSOLIDATED STATEMENT OF FINANCIAL POSITION (In millions of Russian rubles, unless otherwise stated)

As of 31 December Notes 2018 2017 Assets Non-current assets 10 Property, plant and equipment 769,309 605,315 11 Advances and prepayments for capital construction 33,988 69,015 12 Goodwill 12,097 12,097 12 Intangible assets excluding goodwill 103,454 107,822 13 Investments in joint ventures and associates 35,853 33,673 30 Deferred income tax assets 8,465 11,731 Long-term advances issued under project management 14 and construction services 53,509 52,027 Loans receivable 1,878 1,501 15 Prepaid borrowing costs 1,665 2,307 16 Trade and other receivables 6,576 2,408 Other non-current assets 3,723 2,848 Total non-current assets 1,030,517 900,744 Current assets 17 Inventories 40,467 31,734 Prepaid current income tax 1,190 2,334 16 Trade and other receivables 45,209 25,751 18 Prepayments and other current assets 26,620 24,085 Short-term advances issued under project management 14 and construction services 86,164 39,699 15 Prepaid borrowing costs 4,091 4,455 20 Cash and cash equivalents 14,783 48,456 Total current assets 218,524 176,514 3, 4 Assets classified as held for sale 9,605 6,568 Total assets 1,258,646 1,083,826 Liabilities and equity Non-current liabilities 21 Long-term debt excluding related to ZapSibNeftekhim 73,337 111,786 22 Long-term ZapSibNeftekhim related debt 236,940 170,712 23 Deferred income from grants and subsidies 55,335 48,720 Long-term advances received under project management 14 and construction services 66,268 58,524 30 Deferred income tax liabilities 34,261 38,730 24 Other non-current liabilities 15,885 16,575 Total non-current liabilities 482,026 445,047 Current liabilities 25 Trade and other payables 119,888 95,360 Short-term advances received under project management 14 and construction services 76,891 39,558 Income tax payable 4,640 1,611 21 Current portion of long-term debt excluding related to ZapSibNeftekhim 13,300 27,361 22 Current portion of long-term ZapSibNeftekhim related debt 8,834 2,485 27 Taxes other than income tax payable 10,924 8,550 Total current liabilities 234,477 174,925 3, 4 Liabilities associated with assets classified as held for sale 1,679 6,696 Total liabilities 718,182 626,668 Equity 28 Ordinary share capital 21,784 21,784 Share premium 9,357 9,357 Equity-settled share-based payment plans 32,450 32,450 Retained earnings 468,879 388,515 Total equity attributable to the shareholders of the parent company 532,470 452,106 29 Non-controlling interest 7,994 5,052 Total equity 540,464 457,158 Total liabilities and equity 1,258,646 1,083,826

The accompanying notes on pages 6 to 61 are an integral part of these consolidated financial statements

2 F-39 PJSC SIBUR HOLDING IFRS CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions of Russian rubles, unless otherwise stated)

Year ended 31 December Notes 2018 2017 Operating activities 31 Cash from operating activities before income tax payment 184,991 172,317 Income tax paid (24,582) (19,640) 31 Net cash from operating activities 160,409 152,677 Investing activities Purchase of property, plant and equipment (145,505) (131,765) Purchase of intangible assets and other non-current assets (5,933) (3,496) 23 Grants and subsidies received 9,536 11,274 35 Acquisition of interest in subsidiary, net of cash acquired (3,023) (2,227) Proceeds from disposal of subsidiary, net of cash disposed - 22,136 Income tax paid on the disposal of subsidiary - (3,471) Additional contributions to the share capital of joint ventures and 13 associates (598) (2,075) 13 Dividends received 1,937 2,247 Interest received 1,054 1,877 13 Loans issued (153) (1,493) Repayment of loans receivable - 971 Proceeds from sale of property, plant and equipment 9,617 65 Other (218) (78) Net cash used in investing activities (133,286) (106,035) Financing activities Proceeds from debt 53,568 73,411 Repayment of debt (75,834) (96,498) Interest paid (13,569) (14,655) 28, 29 Dividends paid (27,126) (19,709) Bank commissions paid (896) (1,707) 19 Return of deposit under loan settlement arrangement - 1,384 Net cash used in financing activities (63,857) (57,774) Effect of exchange rate changes on cash and cash equivalents 3,061 (1,047) Net decrease in cash and cash equivalents (33,673) (12,179) Cash and cash equivalents, at the beginning of the reporting year 48,456 60,635 Cash and cash equivalents, at the end of the reporting year 14,783 48,456

The accompanying notes on pages 6 to 61 are an integral part of these consolidated financial statements 3 F-40 PJSC SIBUR HOLDING IFRS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In millions of Russian rubles, unless otherwise stated)

Attributable to the shareholders of the parent company Equity- settled Non- share-based control- Share Share payment Retained ling Total Notes capital premium plans earnings Total interest equity Balance as of 1 January 2017 21,784 9,357 32,450 290,889 354,480 2,258 356,738 Profit for the year - - - 116,909 116,909 3,337 120,246 Actuarial loss on post-employment benefit obligations - - - (112) (112) (5) (117) Total comprehensive income for the year - - - 116,797 116,797 3,332 120,129 28, 29 Dividends - - - (19,171) (19,171) (538) (19,709) Balance as of

31 December 2017 21,784 9,357 32,450 388,515 452,106 5,052 457,158

Balance as of

1 January 2018 21,784 9,357 32,450 388,515 452,106 5,052 457,158 Effect of transition 37 to IFRS 15 - - - (425) (425) - (425) Balance as of 1 January 2018, restated 21,784 9,357 32,450 388,090 451,681 5,052 456,733 Profit for the year - - - 106,329 106,329 4,431 110,760 Actuarial gain on post-employment benefit obligations - - - 188 188 8 196 Total comprehensive income for the year - - - 106,517 106,517 4,439 110,956 Deconsolidation of 3 subsidiary - - - - - (99) (99) 28, 29 Dividends - - - (25,728) (25,728) (1,398) (27,126) Balance as of 31 December 2018 21,784 9,357 32,450 468,879 532,470 7,994 540,464

The accompanying notes on pages 6 to 61 are an integral part of these consolidated financial statements 4 F-41 PJSC SIBUR HOLDING IFRS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In millions of Russian rubles, unless otherwise stated)

Year ended 31 December 2018 2017 Profit for the year 110,760 120,246 Other comprehensive income/(loss): 196 (117) Actuarial gain/(loss) on post-employment benefit obligations 249 (157) Deferred tax effect (53) 40 Total comprehensive income for the year 110,956 120,129 Total comprehensive income for the year, including attributable to: 110,956 120,129 Non-controlling interest 4,439 3,332 Shareholders of the parent company 106,517 116,797

The accompanying notes on pages 6 to 61 are an integral part of these consolidated financial statements

5 F-42 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

1 NATURE OF OPERATIONS

2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The preparation of consolidated financial statements under International Financial Reporting Standards (IFRS) requires the use of certain accounting estimates which, by definition, may differ from actual results. Estimates and judgements are continually evaluated; revisions of estimates are recognized prospectively. It also requires management to exercise judgement when applying the Group’s accounting policies.

Judgements that have the most significant effect on the amounts recognized in the consolidated financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities in future financial reporting periods are as follows:

Tax legislation. Russian tax, currency and customs legislation is subject to varying interpretations (see Note 36).

Deferred income tax asset recognition. Deferred income tax assets are recognized to the extent that it is probable that the future taxable profit will be available to cover such assets. When determining future taxable profits and the amount of tax benefits available to certain Group entities, the management makes judgements and applies estimates based on recent taxable profits and expectations of future income that are believed to be reasonable under the circumstances.

Useful lives of property, plant and equipment. Estimating the useful life of a property, plant and equipment item is based on experience with similar assets. When determining the useful life of an asset, the management considers the expected usage, estimated technical obsolescence, residual value, physical wear and tear, and the environment in which the asset is operated. Differences between such estimates and actual results may result in losses in future periods, and changes in any of these conditions or estimates may result in adjustments to future depreciation rates.

Estimated impairment of goodwill. The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amounts of cash-generating units are the higher of their fair value less costs to sell and their value-in-use calculations. These calculations require the use of estimates (see Note 12).

Estimated impairment of property, plant and equipment and intangible assets excluding goodwill. Property, plant and equipment and intangible assets excluding goodwill are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or CGU).

The recoverable amount of a CGU is the higher of its fair value less costs to sell and its value-in-use calculations, which require the estimation of discounted cash flows. The estimation of cash flows and assumptions considers all information available at the year-end on the future development of the operating business and may deviate from actual future developments. An impairment charge is the difference between the carrying amount and the recoverable CGU amount.

F-43 6 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (СONTINUED)

Grants and subsidies. As a major investor in infrastructure and social projects in the regions where it operates, the Group has signed cooperation agreements with several regional authorities, including investment and financial support agreements, under which the Group is entitled to a partial refund of capital expenditures incurred in the respective regions subject to certain conditions. Such reimbursements are made after supporting documents have been submitted to the relevant authority in the form of a direct grant of public funds. Quarterly, at each reporting date, management assesses whether there is a reasonable assurance that the Group is able to comply with the required conditions. The management believes that the Group will be able to comply with the conditions stipulated by the agreements.

Operating leases. The Group has also a number of arrangements with several shipping companies for freight of eight vessels with terms from 5 to 10 years. At the inception date, the minimum lease payments for contracts were up to 80-85 percent of the value of the vessels and the economic useful life amounted to approximately 30 years. Based on that, and on the fact that the rewards are not substantially transferred to the Group because at the end of the lease period vessels will be capable for generating significant cash flow, the rented vessels are presented as an operating lease in these consolidated financial statements.

The Group had a number of contracts with third parties for the rental of tank wagons (railway cars) with terms of 5-10 years each. At their inception minimum lease payments for some of the contracts were close to the market value of the wagons. At the same time this situation resulted from a shortage of rail cars on the market and the strong negotiating position of service providers. Based on that, and on the fact that the rewards are not substantially transferred to the Group because at the end of the lease period cars will be capable of generating significant cash flow (even if they are subsequently sold or rented at significant discounts), the rented cars were accounted for as an operating lease in the consolidated financial statements until the contacts were cancelled by the Group due to establishment of PTC LLC (see Note 13).

Contracts on construction services. JSC NIPIgaspererabotka (“NIPIGAS”), a Group subsidiary, is engaged in the construction of a combined oil refining unit for JSC Gazpromneft Moscow Refinery and the construction of utilities, infrastructure and offsites for JSC Gazpromneft Omsk Refinery. On both contracts, NIPIGAS acts as contractor, providing the construction services. Also, NIPIGAS is engaged in the ARCTIC LNG 2 project for PJSC NOVATEK by providing engineering services to NOVAENGINEERING (see Note 3).

The Group recognizes revenue for such contracts over time using the input method, applying judgement over the expected costs to be incurred until project completion. If circumstances arise that may change the original estimates of revenue (which is generally fixed in the contract with minor variable components), costs or the extent of progress toward completion, the estimates are revised. These revisions may result in increases or decreases in estimated revenues and total costs and are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

In addition, receivables related to contracts on project management and construction services are subject to credit risk. In other words, although some revenue continues to be contractually bound, the customer can still refuse to pay or to pay in time. Where revenue has been recognized on a contract, but an uncertainty subsequently arises about the recoverability of the related amount due from the customer, any provision against the amount due is recognized as an expense.

For the years ended 31 December 2018 and 31 December 2017, the Group recognized revenue from the application of the input method by reference to costs incurred of RUB 26,409 and RUB 7,988, respectively (see Note 9).

F-44 7 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (СONTINUED)

Amur GPP project. In July 2015, Gazprom Pererabotka Blagoveshchensk LLC, a Gazprom Group member, and NIPIGAS signed a contract to manage a project on constructing the Amur Gas Processing Plant (“Amur GPP”) in the Amur Region. Under this agreement, NIPIGAS manages and supervises engineering work, procurement and delivery of equipment and materials, and construction work until the transfer of the plant to Gazprom Pererabotka Blagoveshchensk LLC in a state of mechanical completion. Amounts received under this contract include amounts payable to subcontractors for services rendered and equipment delivered, and NIPIGAS’s management services fee.

The Group's management considered that under this project the Group's promise is to arrange for specified goods or services to be provided to the customer by the other parties, as the customer has a significant control over the construction process, including approval by Gazprom Pererabotka Blagoveshchensk LLC of contracts with subcontractors and preapproval of services rendered and equipment delivered by subcontractors before its acceptance by NIPIGAS. Thus, amounts received from the customer and transferred to subcontractors for construction services and equipment delivery are not recognized as revenue in the consolidated statement of profit or loss. Remuneration for management services rendered by NIPIGAS is recognized within revenue from project management and construction services in the consolidated statement of profit or loss.

JSC NIPIgaspererabotka consolidation. The effective percentage of NIPIGAS’s share capital held by the Group became 45 percent, representing 50 percent of the voting shares, as the result of shares sale to certain companies controlled by some of Company’s shareholders, including those that simultaneously serve as senior Group management. The Group continued to consolidate NIPIGAS as it has retained control over its relevant activities as defined by IFRS 10 “Consolidated Financial Statements”. The Group has made a significant judgement that it has retained control over NIPIGAS as the Group and its key management can cumulatively control a majority of votes at the meetings of NIPIGAS’s governing bodies.

SIBUR-Portenergo LLC disposal. In 2015, the Company sold its 100% interest in SIBUR-Portenergo LLC, the subsidiary of the Group that operates the liquefied petroleum gas and naphtha transshipment terminal located in Ust-Luga, Leningrad Region (“Terminal”), to Baltic Sea Transshipment PTE. Ltd (“Buyer”) and signed a long-term, take-or-pay transshipment contract with SIBUR-Portenergo LLC (valid through December 2029) under which the Company must transship its liquefied petroleum gas (“LPG”) and fully utilize the Terminal’s LPG transshipment capacity. As well, the Company must transship its naphtha and utilize a pre-determined percentage of the Terminal’s naphtha transshipment capacity if there are no other customers.

After the disposal, Management company SIBUR-Portenergo LLC (“Management Company”), a subsidiary of the Group, manages Terminal operations for a service fee. The Buyer is entitled to terminate the service contract with the Management Company at any time.

The Buyer makes decisions regarding all relevant Terminal activities, as defined by IFRS 10 “Consolidated Financial Statements”, including approving its budgets, setting the terms of significant contracts, and financing and investing activities. The Management Company operates under budgets approved by the Buyer. Should the Management Company disagree with the Buyer’s approved budget, it will formally relinquish responsibility for Terminal operations and will officially notify the Buyer accordingly.

The Group’s management made a significant judgement that, although the Group has retained some exposure or rights to variable returns from its involvement with the Terminal, it does not control the Terminal because it is the Buyer’s prerogative to make decisions on relevant Terminal operations, and the Terminal’s naphtha transshipment capacity may be utilized by third parties upon a decision of the Buyer.

F-45 8 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

3 ACQUISITION AND DECONSOLIDATION OF SUBSIDIARIES

LNG NOVAENGINEERING LLC

As of 31 December 2017, the Group classified assets and liabilities of its subsidiary LNG NOVAENGINEERING LLC (“NOVAENGINEERING”) as assets held for sale and associated liabilities. NOVAENGINEERING was founded by NIPIGAS in February 2017 to provide engineering, design and other services related to gravity-based structure liquefied natural gas plants, including ARCTIC LNG 2 project for PJSC NOVATEK.

In January 2018, the part of NIPIGAS’s interest in NOVAENGINEERING was sold for a cash consideration of RUB 16 to Technip France and LINDE AG. As a result the ownership percentage of NIPIGAS in NOVAENGINEERING decreased to 50.1 percent. In accordance with the Charter of NOVAENGINEERING and the other documents concluded to implement ARCTIC LNG 2 and other projects, the participants exercise joint control over relevant activities of NOVAENGINEERING and the Group’s management determines it as a joint venture. The Group’s management is planning to keep the Group’s majority ownership percentage in NOVAENGINEERING. Fair value of the Group’s investment retained in NOVAENGINEERING approximated its carrying value as of the disposal date.

The carrying amounts of NOVAENGINEERING’s assets and liabilities as of the disposal date amounted to RUB 7,312 and RUB 7,279, respectively (as of 31 December 2017 – RUB 6,568 and RUB 6,696, respectively). NOVAENGINEERING's assets were mainly presented by trade and other receivables; liabilities were mainly presented by advances from customers.

The Group did not incur any significant transaction costs on the disposal. Until the disposal date NOVAENGINEERING’s financial results had been reported as Unallocated in the segment information (see Note 8).

JSC Uralorgsintez

In 2017 the Company sold its 100% interest in its subsidiary JSC Uralorgsintez to JSC ECTOSintez (“the Buyer”), a Russian producer of anti-knock compounds, mainly benzene hydrocarbons and methyl tertiary butyl ether (“MTBE”), for a cash consideration of RUB 22,000 and a working capital price adjustment of RUB 175, both received in the first half 2017.

The main operating activities of JSC Uralorgsintez are processing hydrocarbon feedstock to LPG and naphtha, and producing MTBE, a high-octane fuel additive.

The interest was disposed under condition that the Company and the Buyer would sign several operating agreements, including those, under which the Buyer is obliged to: 1) process certain types of the Group's feedstock into finished goods using significant part (up to full capacity) of relevant JSC Uralorgsintez's production facilities; 2) purchase certain raw materials from the Group to utilise significant part of some JSC Uralorgsintez's production capacities with the option of the Group to utilise the residual part of these production capacities; 3) sell a significant part of JSC Uralorgsintez's major product to third parties when the Group acts as a sales agent. All these contracts were signed at the transaction date for the 10-years period at fair market prices.

The Company’s management considered the requirements of IFRIC 4 “Determining Whether an Arrangement Contains a Lease”. The terms of the contracts are at arm’s length. More than an insignificant amount of JSC Uralorgsintez’s output will be consumed by parties other than the Group, and the Buyer makes decisions on relevant operations of JSC Uralorgsintez and controls physical access to the production site. As a result, the management made a significant judgement that it is not a lease arrangement, even though the Group will utilise some of the JSC Uralorgsintez’s production capacity.

F-46 9 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

3 ACQUISITION AND DECONSOLIDATION OF SUBSIDIARIES (СONTINUED)

The carrying amounts of JSC Uralorgsintez’s assets and liabilities as of the disposal date amounted to RUB 2,909 and RUB 539, respectively. As a result of the disposal, the Company recognized a gain in the amount of RUB 19,805, which was classified as a gain on disposal of subsidiary in the consolidated statement of profit or loss.

The Company did not incur any significant transaction costs on this disposal. Until the disposal date JSC Uralorgsintez’s financial results were reported in the Plastics, Elastomers and Intermediates segment (see Note 9).

4 ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE

In the third quarter of 2018, the Group decided to sell part of its petrochemical production facilities which is not a strategic priority asset within the Group portfolio to an unrelated third party on market terms, related assets and liabilities were reclassified to the held for sale category.

As of the date of reclassification and reporting date, assets classified as held for sale and associated liabilities were as follows:

Assets and liabilities classified as held for sale Reclassification date 31 December 2018 Assets Property, plant and equipment 7,818 8,331 Inventories 805 926 Other assets 358 348 Total assets 8,981 9,605

Liabilities Trade and other payables 1,007 1,118 Other liabilities 561 561 Total liabilities 1,568 1,679

As of 31 December 2017, the assets and liabilities associated with the assets classified as held for sale represented by assets and liabilities of the Group’s subsidiary LNG NOVAENGINEERING LLC (“NOVAENGINEERING”) (see Note 3).

F-47 10 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

5 REVENUE

Revenue by products and reportable segments is presented below:

Year ended 31 December 2018 2017 Midstream* 240,818 184,199 Liquefied petroleum gas 152,206 110,708 Natural gas 49,067 47,474 Naphtha 37,572 23,904 Other sales 1,973 2,113 Olefins and Polyolefins 100,862 88,135 Polyolefins 68,913 63,576 BOPP films 18,471 16,642 Olefins 7,726 5,810 Other polymers products 4,930 1,418 Other sales 822 689 Plastics, Elastomers and Intermediates 171,003 146,877 Plastics and organic synthesis products 59,878 47,227 Elastomers 55,021 51,857 MTBE and fuel additives 29,753 23,120 Intermediates and other chemicals 25,137 23,410 Other sales 1,214 1,263 Unallocated 55,964 35,408 Revenue from project management and construction services 41,047 21,460 Other revenue 14,917 13,948 Total revenue 568,647 454,619

1 * In the second quarter 2018 the segment Feedstock and Energy was renamed to Midstream without any changes in the segment structure.

The amount of revenue recognized over time except for revenue from construction services recognized over time (separately disclosed in Note 2) for the year ended 31 December 2018 equals to RUB 20,668 (for the year ended 31 December 2017 - RUB 15,441, if prior year revenue would be recorded under accounting policies adjusted as the result of IFRS 15 adoption).

As of 31 December 2018 unsatisfied performance obligations on project management and construction services equals to RUB 117,584. Management expects that RUB 47,236 of this amount will be recognized as revenue in 2019 in accordance with the contract terms. The residual amount will be recognized until 2025.

F-48 11 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

6 OPERATING EXPENSES Year ended 31 December 2018 2017 Feedstock and materials 130,669 87,983 Transportation and logistics 75,021 67,058 Staff costs 43,171 38,334 Energy and utilities 39,839 38,770 Depreciation and amortization 35,510 35,486 Goods for resale 32,512 23,170 Services provided by third parties 29,645 14,129 Repairs and maintenance 12,792 13,242 Taxes other than income tax 3,983 3,313 Processing services of third parties 3,696 3,333 Rent expenses 1,603 1,354 Marketing and advertising 1,439 1,221 Charity and sponsorship 858 820 Impairment of property, plant and equipment 416 164 Impairment of assets held for sale - 180 (Gain)/loss on disposal of property, plant and equipment (4,503) 319 Change in WIP and refined products balances (6,247) (1,803) Other 3,162 2,525 Total operating expenses 403,566 329,598

The Group’s production facilities are located in the Russian Federation and most of the Group’s operating expenses are generated at these production plants. Transportation expenses are closely related to the Group’s geography of sales disclosed in Note 8.

In 2018, due to change in the accounting policy the cost of spare parts and materials for repairs was reclassified from “Feedstock and materials” to “Repairs and maintenance” with retrospective adjustments. For the years ended 31 December 2018 and 31 December 2017 the amount of reclassification equals to RUB 4,145 and RUB 4,951, respectively.

Staff costs for the years ended 31 December 2018 and 31 December 2017 included statutory pension and other social security contributions of RUB 7,759 and RUB 7,127, respectively, also RUB 671 and RUB 592 of statutory pension and other social security contributions were capitalized in cost of property, plant and equipment for the years ended 31 December 2018 and 31 December 2017, respectively.

For the year ended 31 December 2018 “(Gain)/loss on disposal of property, plant and equipment” included gain from sale of Group’s own tanks for LPG transportation in the amount of RUB 4,711. The consideration of RUB 9,475 for these tanks was fully received in cash in the fourth quarter of 2018 (Note 13).

F-49 12 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

7 FINANCE INCOME AND EXPENSES

Year ended 31 December 2018 2017 Interest income 1,464 2,012 Unwinding of discount on loans receivable and non-current accounts receivable 124 142 Discount on loans and borrowings 23 93 Foreign exchange gain from financing activities - 11,150 Gain on the loan release (Note 19) - 1,384 Other income 720 176 Total finance income 2,331 14,957 Foreign exchange loss from financing activities (25,907) - Foreign exchange loss from non-financing activities (2,981) (2,107) Unwinding of discount on non-current accounts payable (1,379) (1,178) Interest expense (945) (6,416) Interest expense on post-employment obligations (196) (191) Bank commissions (52) (783) Other expense (230) (299) Total finance expenses (31,690) (10,974)

8 SEGMENT INFORMATION

At the beginning of the reporting period, the chief operating decision-makers were the Chairman of the Management Board, the Chief Operating Officer, the Chief Financial Officer and three Executive Directors. In February 2018, the Company updated its Charter and now has two single-member executive bodies, namely Chairman of the Management Board of PJSC SIBUR Holding and Chief Executive Officer of SIBUR LLC – the management company of the Group. This decision results from previously initiated processes seeking to separate strategic management from operational to further enhance management efficiency. As a result, the Group’s chief operating decision-makers are now the Chairman of the Management Board, the Chief Executive Officer, the Chief Financial Officer and three Executive Directors. These executives regularly review the Group’s internal reporting in order to assess performance and allocate resources.

The Group’s management determines three operating and reportable segments:

• Midstream – processing of associated petroleum gas and raw natural gas liquids to produce energy products, natural gas, liquefied petroleum gases and naphtha, which are used as feedstock by the Olefins and Polyolefins segment and the Plastics, Elastomers and Intermediates segment and also marketed and sold externally; • Olefins and Polyolefins – mainly the production of polypropylene, polyethylene, propylene, ethylene and BOPP films; • Plastics, Elastomers and Intermediates – the production of synthetic rubbers, plastics, organic synthesis products and other petrochemical products. In addition, the Plastics, Elastomers and Intermediates segment produces fuel additives, including MTBE, which is fully sold externally.

F-50 13 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

8 SEGMENT INFORMATION (СONTINUED)

Starting fourth quarter 2018 Adjusted EBITDA is calculated by the management net of NCI share of related subsidiaries’ EBITDA. Figures for 2017 were adjusted accordingly.

Inter-segment transfers include transfers of raw materials, goods and services from one segment to another, amount is determined based on the market prices for similar goods.

Other information provided to management, except as noted below, is measured in a manner consistent with that in these consolidated financial statements.

Olefins Plastics, Total Mid- and Poly- Elastomers and reportable stream olefins Intermediates segments Unallocated Total Year ended 31 December

2018 Total segment revenue 294,790 130,899 174,006 599,695 58,312 658,007 Inter-segment transfers (53,972) (30,037) (3,003) (87,012) (2,348) (89,360) External revenue 240,818 100,862 171,003 512,683 55,964 568,647 EBITDA 127,107 37,679 34,816 199,602 1,405 201,007

Adjusted EBITDA 127,771 46,507 34,611 208,889 (3,360) 205,529 Year ended 31 December 2017 Total segment revenue 223,484 112,910 149,710 486,104 37,169 523,273 Inter-segment transfers (39,285) (24,775) (2,833) (66,893) (1,761) (68,654) External revenue 184,199 88,135 146,877 419,211 35,408 454,619 EBITDA 86,672 44,636 33,037 164,345 (3,494) 160,851

Adjusted EBITDA 87,415 51,790 32,938 172,143 (7,179) 164,964

For the years ended 31 December 2018 and 31 December 2017, EBITDA in US dollars measured at the weighted average exchange rate of the US dollar against the Russian ruble, calculated for corresponding periods (see Note 37), was USD 3,205 million and USD 2,757 million, respectively.

F-51 14 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

8 SEGMENT INFORMATION (СONTINUED)

A reconciliation of EBITDA to profit before income tax was as follows:

Year ended 31 December 2018 2017 EBITDA 201,007 160,851 Finance income 2,331 14,957 Finance expenses (31,690) (10,974) Result of subsidiary’s acquisition and remeasurement of related liabilities (217) (965) Result of subsidiary’s disposal and remeasurement of related assets (425) 19,805 Share of net income of joint ventures and associates 3,173 2,073 Depreciation and amortization (35,510) (35,486) Impairment of property, plant and equipment (416) (164) Impairment of assets held for sale - (180) Profit before income tax 138,253 149,917

Geographical information

The breakdown of revenues by geographical regions was as follows:

Year ended 31 December 2018 2017 Russia 333,394 262,862 Europe 179,196 135,989 Asia 26,082 29,193 CIS 25,661 23,888 Other 4,314 2,687 Total revenue 568,647 454,619

9 CONTRACTS ON CONSTRUCTION SERVICES

The Group’s financial position with respect to contracts on construction services in progress as of 31 December 2018 and 31 December 2017 was as follows:

31 December 2018 31 December 2017 Construction service revenue 33,216 8,997 Less: Progress billings (33,472) (9,842) Advances from customers (6,672) (6,594) Contract liabilities (6,928) (7,439)

31 December 2018 31 December 2017 Construction service revenue 3,635 - Less: Progress billings (3,034) - Advances from customers (137) - Contract assets 464 -

For the year ended 31 December 2017 the aggregate amount of contract costs incurred and aggregate amount of recognized profits were RUB 7,486 and RUB 1,511, respectively.

As of 31 December 2018, contracts on construction services in progress include the contracts with NOVAENGINEERING, which were intercompany before its deconsolidation (see Notes 2, 3).

F-52 15 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

10 PROPERTY, PLANT AND EQUIPMENT

Movements in the net book value of property, plant and equipment were as follows:

Machinery and Assets under Buildings Facilities equipment Transport construction Other Total Net book value as of 1 January 2017 45,600 144,065 100,852 6,649 130,854 6,982 435,002 Depreciation charge (2,351) (10,532) (15,371) (600) - (1,816) (30,670) Additions - - - - 201,749 2,300 204,049 Transfers 9,583 7,633 9,510 47 (27,182) 409 - Reclassification to inventories - - - - - (1,260) (1,260) Reversal of impairment / (impairment) 38 14 102 - (333) 15 (164) Disposals (857) (68) (73) (48) (410) (186) (1,642) Historical cost as of 31 December 2017 65,383 191,997 172,155 11,134 304,678 11,051 756,398 Accumulated depreciation (13,370) (50,885) (77,135) (5,086) - (4,607) (151,083) Net book value as of 1 January 2018 52,013 141,112 95,020 6,048 304,678 6,444 605,315 Depreciation charge (2,858) (10,541) (14,622) (376) - (2,267) (30,664) Additions - - - - 203,381 6,190 209,571 Transfers 3,490 6,130 9,800 86 (20,249) 743 - Impairment - - - - (199) (217) (416) Disposals (705) (81) (249) (4,324) (20) (717) (6,096) Reclassification to assets held for sale (Note 4) (587) (1,794) (4,669) (68) (856) (427) (8,401) Historical cost as of 31 December 2018 67,310 195,447 171,214 3,105 486,735 15,896 939,707 Accumulated depreciation (15,957) (60,621) (85,934) (1,739) - (6,147) (170,398) Net book value as of 31 December 2018 51,353 134,826 85,280 1,366 486,735 9,749 769,309

For the years ended 31 December 2018 and 31 December 2017, the Group capitalized borrowing costs of RUB 30,595 and RUB 14,109, respectively. Borrowing costs included foreign exchange losses in the amount of RUB 16,845 and RUB 4,632 for the respective years. The annual capitalization rates, excluding the effect of capitalized foreign exchange losses from financing activities, were 6.63 percent and 6.60 percent, respectively.

11 ADVANCES AND PREPAYMENTS FOR CAPITAL CONSTRUCTION

Advances and prepayments in the amount of RUB 33,988 and RUB 69,015 as of 31 December 2018 and 31 December 2017, respectively, primarily were paid to suppliers and contractors under the major investment project of the Group – ZapSib.

As of 31 December 2018, the most significant advances and prepayments were paid to Renaissance Heavy Industries, Linde AG Engineering Division, Yamata Endüstriyel Projeler Inşaat Taahhüt ve Ticaret, JSC PROMSTROI-GROUP, China National Chemical Engineering No.7 Construction Co., Ltd, Technip France.

F-53 16 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

11 ADVANCES AND PREPAYMENTS FOR CAPITAL CONSTRUCTION (СONTINUED)

As of 31 December 2017, the most significant advances and prepayments were paid to Linde AG Engineering Division, Renaissance Heavy Industries, Yamata Endüstriyel Projeler Inşaat Taahhüt ve Ticaret, Technip France, China National Chemical Engineering No.7 Construction Co., Ltd.

Management assessed the risks of non-recoverability and requested a collateral against advances and prepayments when the risk was considered as moderate or higher. On a regular basis, management reviews and monitors the status of work performed under each construction, other services and supply agreements. The Group’s management assesses the risk that some of the advances and prepayments would not be recovered as insignificant.

12 GOODWILL AND INTANGIBLE ASSETS

The net book value of intangible assets was as follows:

Customer Supply Software and Development Goodwill relationships contracts licences costs Total Net book value as of 1 January 2017 12,097 343 101,715 10,566 1,604 126,325 Additions - - - 2,941 467 3,408 Disposals - - - (21) (97) (118) Amortisation charge - (71) (7,023) (2,602) - (9,696) Historical cost as of 31 December 2017 12,097 680 119,931 17,896 1,974 152,578 Accumulated amortisation - (408) (25,239) (7,012) - (32,659) Net book value as of 1 January 2018 12,097 272 94,692 10,884 1,974 119,919 Additions - - - 5,335 597 5,932 Disposals - - - (57) (95) (152) Amortisation charge - (71) (7,013) (2,988) - (10,072) Reclassification to assets held for sale(Note 4) - - - (40) (36) (76) Historical cost as of 31 December 2018 12,097 680 119,931 22,680 2,440 157,828 Accumulated amortisation - (479) (32,252) (9,546) - (42,277) Net book value as of 31 December 2018 12,097 201 87,679 13,134 2,440 115,551

Intangible assets other than goodwill are presented in a separate line in the consolidated statement of financial position.

Impairment tests for goodwill

Goodwill related to the acquisitions of SIBUR International GmbH, Biaxplen LLC and Yugragazpererabotka LLC is allocated to the Group’s cash-generating units (“CGUs”), which are the same as operating and reportable segments (see Note 8).

F-54 17 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

12 GOODWILL AND INTANGIBLE ASSETS (СONTINUED)

An operating segment-level summary of the goodwill allocation is presented below:

31 December 2018 31 December 2017 SIBUR International GmbH Midstream 3,189 3,189 Olefins and Polyolefins 1,160 1,160 Plastics, Elastomers and Intermediates 2,348 2,348

Biaxplen LLC Olefins and Polyolefins 2,783 2,783

Yugragazpererabotka LLC Midstream 2,479 2,479

IT-Service LLC Unallocated 138 138 Total goodwill 12,097 12,097

The recoverable amount for each CGU is the higher of its fair value, less the selling cost and its value- in-use calculations, and has been determined based on a value-in-use calculation. These calculations use pre-tax cash flow projections based on management’s five-year financial forecast prepared as of the year end. Cash flows beyond the five-year period are extrapolated using an estimated growth rate of three percent. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. The following key assumptions are used in the value-in-use calculation: a discount rate of 17.87 percent, an exchange rate of RUB 65-70 to USD 1, an oil price of USD 65-73 per bbl, and a Consumer Price Index of 4.0-4.3 percent. The discount rates used are pre-tax and reflect specific risks relating to the CGU’s operating activity.

As the result of the management assessment no impairment of goodwill was identified.

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

Country of Interest held incorporation (percent) 31 December 2018 31 December 2017 RusVinyl LLC Russia 50 19,598 19,305 Yuzhno-Priobsky GPP LLC Russia 50 6,100 6,121 Reliance Sibur Elastomers Private Limited India 25.1 4,084 3,400 Sibgazpolimer JSC* Russia 50 3,061 2,263 NPP Neftekhimia LLC Russia 50 2,470 2,583 PTC LLC Russia 50 477 - LNG NOVAENGINEERING LLC Russia 50.1 62 - SNHK LLC Russia 50 1 1 Total investments in joint ventures and associates 35,853 33,673

* Special purpose vehicle established for investing in production entities.

F-55 18 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (СONTINUED)

The voting and ownership percentage in joint ventures and associates are the same, except for LNG NOVAENGINEERING LLC (see Note 3).

The table below summarises the movements in the carrying amount of the Group’s investment in associates and joint ventures.

2018 2017 As of the beginning of the year 33,673 31,757 Share of profit of joint ventures and associates 3,173 2,073 Additions 253 2,075 Dividends received from joint ventures and associates (1,937) (2,247) Translation differences 691 15 As of the end of the year 35,853 33,673

All individually material associates and joint ventures are private companies and, thus, there are no quoted prices for their shares. All of these entities have share capital consisting solely of ordinary shares, which are held directly by the shareholders.

The Group reviews its investments in joint ventures and associates for potential impairment indicators on a regular basis. As of 31 December 2018 and 31 December 2017 there were no circumstances that would indicate the carrying value of investments in joint ventures and associates exceeds its recoverable amount.

The nature of the Group’s relationship with and the financial information of each individually material associate and joint venture are described below.

RusVinyl LLC. RusVinyl LLC is a joint venture between the Group and SolVin Holding Nederland B.V. (which is ultimately controlled by Solvay SA) to produce a polyvinyl chloride on a new plant, constructed by RusVinyl LLC in the Nizhny Novgorod Region.

The Group issued guarantees (debt service undertaking - DSU), which cover 20 percent of loans of Rusvinyl LLC, and pledged its shares in Rusvinyl LLC as a security. In addition to that the Group issued guarantee as a liquidity support undertaking (LSU). As of 31 December 2017 and until the project Completion date (which is determined as achievement of targeted operating and financial performance), the amount of LSU was equal to EUR 32.5 million. After the project Completion date occurred in the end of 2018 DSU guarantee was replaced by LSU guarantee, increased up to EUR 62.5 million.

As of 31 December 2018 and 31 December 2017, the maximum credit risk exposure due to financial guarantees issued for the RusVinyl LLC was RUB 4,966 and RUB 8,093, respectively.

In 2017, the Group issued loan to RusVinyl LLC maturing in 2024 to finance its operating activity. The Group provided loan on an arm’s length basis and its ownership share remained unchanged.

F-56 19 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (СONTINUED)

The table below provides information on the statement of financial position and the results of RusVinyl LLC as of and for the years ended 31 December 2018 and 2017.

31 December 2018 31 December 2017 Assets Non-current assets Property, plant and equipment 62,088 64,952 Other non-current assets 2,211 2,429 Current assets Cash and cash equivalents 3,678 1,807 Other current assets 4,803 4,407 Total assets 72,780 73,595

Liabilities Non-current liabilities Financial liabilities 25,557 27,297 Current liabilities Financial liabilities 5,748 5,291 Other current liabilities 2,279 2,397 Total liabilities 33,584 34,985 Net assets 39,196 38,610

Year ended 31 December 2018 2017 Revenue 27,058 22,578 Depreciation and amortisation (3,484) (3,433) Interest income 39 22 Interest expense (2,162) (2,787) Other finance expense (355) (66) Foreign exchange loss (3,258) (1,712) Income tax expense (200) (185) Profit for the period 586 493

Yuzhno-Priobsky GPP LLC. In 2007, the Group and the Gazprom Neft Group established a joint venture in the Khanty-Mansiysk Autonomous District to construct a gas processing plant based on Yuzhno-Priobskaya compressor station. On 3 September 2015, Yuzhno-Priobsky GPP LLC began its operation.

F-57 20 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (СONTINUED)

The table below provides information on the statement of financial position and the results of Yuzhno- Priobsky GPP LLC as of and for the years ended 31 December 2018 and 2017.

31 December 2018 31 December 2017 Assets Non-current assets Property, plant and equipment 7,495 8,655 Other non-current assets 263 298 Current assets Cash and cash equivalents 1 1 Other current assets 5,141 4,103 Total assets 12,900 13,057

Liabilities Non-current liabilities Other non-current liabilities 326 365 Current liabilities Other current liabilities 375 450 Total liabilities 701 815 Net assets 12,199 12,242

Year ended 31 December 2018 2017 Revenue 2,102 2,004 Depreciation and amortisation (1,215) (1,363) Foreign exchange gain 4 1 Income tax expense (16) (23) Profit for the period 58 101

NPP Neftekhimia LLC. In September 2010, the Group established a joint venture, NPP Neftekhimia LLC, with AO Moskovskiy NPZ (later renamed to JSC Gazpromneft Moscow Refinery), a member of the Gazprom Neft Group. The joint venture is a polypropylene producer located in Moscow, and the Group purchases substantially all of its production volumes.

The table below provides information on the statement of financial position and the results of NPP Neftekhimia LLC as of and for the years ended 31 December 2018 and 2017.

31 December 2018 31 December 2017 Assets Non-current assets Property, plant and equipment 1,273 1,495 Other non-current assets 55 68 Current assets Cash and cash equivalents 519 310 Other current assets 786 926 Total assets 2,633 2,799

Liabilities Non-current liabilities Other non-current liabilities 28 27 Current liabilities Other current liabilities 533 513 Total liabilities 561 540 Net assets 2,072 2,259

F-58 21 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (СONTINUED)

Year ended 31 December 2018 2017 Revenue 10,485 6,476 Depreciation and amortisation (325) (278) Interest income 70 87 Foreign exchange loss (4) (4) Income tax expense (745) (403) Profit for the period 2,670 1,350

The nature and summarised financial information of individually immaterial joint venture and associate are provided below.

Reliance Sibur Elastomers Private Limited. In February 2012, the Group and the Reliance Industries Limited established a company for the construction of butyl rubber production facility at Reliance Industries Limited’s integrated petrochemical site in Jamnagar, India. In 2017, the Group made additional contributions to the associate’s share capital of RUB 2,075; the Group’s ownership share remained unchanged.

JSC Sibgazpolimer. In May 2014, JSC Sibgazpolimer acquired a 50 percent stake in Poliom LLC from JSC GK Titan for a cash consideration of RUB 2,297 and a contingent consideration of RUB 2,131. Purchase price allocation resulted in recognition of goodwill in the amount of RUB 5,960, which is included in carrying value of investment in Poliom LLC.

PTC LLC. In 2018 the Group established with JSC SG-Trans (one of the Russian major railway operators) a 50/50 percent joint venture, Petrochemical Transportation Company LLC (PTC LLC). PTC LLC is aimed to be a licensed railway operator, responsible for the provision of the transportation services both for company’s owners and third parties.

The Group sold its LPG tanks (Note 6) to the leasing company that leased out the tanks to the joint venture. The Group included the services rendered by PTC LLC in operating expenses line in the consolidated statement of profit and loss.

Summarized financial information of these individually immaterial joint ventures and associate is provided below.

As of and for the year ended 31 December 2018

Non- Non- Oper. Current current Current current Reve- profit/ Рrofit/ assets assets liabilities liabilities nues (loss) (loss) SNHK LLC - - - - 2,016 - - LNG NOVAENGINEERING LLC 8,045 940 1,536 6,947 392 377 291 Reliance Sibur Elastomers Private Limited 3,380 29,235 2,534 14,679 - (8) (18) Sibgazpolimer JSC 1,668 6,928 - 2,475 2,655 2,652 2,509 PTC LLC 2,853 9,547 3,247 7,467 3,581 478 491

F-59 22 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (СONTINUED)

As of and for the year ended 31 December 2017

Non- Non- Oper. Current current Current current Reve- profit/ Рrofit/ assets assets liabilities liabilities nues (loss) (loss) SNHK LLC - - - - 25 - - Reliance Sibur Elastomers Private Limited 5,620 17,665 2,036 7,256 - (1) (22) Sibgazpolimer JSC 3 6,795 - 2,272 2,212 2,212 1,990

The Group will finance investments in its joint ventures and associates should these entities be unable to attract third parties’ financing. The Group’s commitments under these investment arrangements comprised RUB 200 and RUB 819 as of 31 December 2018 and 2017, respectively.

14 ADVANCES ISSUED AND RECEIVED UNDER PROJECT MANAGEMENT AND CONSTRUCTION SERVICES

Advances received from Gazprom Pererabotka Blagoveshchensk LLC under the project management of construction of the Amur GPP (see Note 2) were paid in full to suppliers and subcontractors as advances for their respective work. The Group’s management considers the terms of advances received and paid based on the expected date of their utilization in the full amount, linked to contractual terms.

As of 31 December 2018 and 31 December 2017, the total amount of advances received from Gazprom Pererabotka Blagoveshchensk LLC under this project is presented in the long-term advances received under project management and construction services line in the amount of RUB 64,746 and RUB 57,099, respectively, and in the short-term advances received under project management and construction services line in the amount of RUB 71,053 and RUB 33,544, respectively, in the consolidated statement of financial position. Advances paid are presented in the long-term advances issued under project management and construction services line in the amount of RUB 53,509 and RUB 52,027, respectively, and in the short-term advances issued under project management and construction services line in the amount of RUB 82,207 and RUB 38,093, respectively, in the consolidated statement of financial position.

Advances issued and received under project management and construction services also include advances under the project of construction of combined oil refining unit for JSC Gazpromneft Moscow Refinery, the project of construction of utilities, infrastructure and offsites for JSC Gazpromneft Omsk Refinery and others (Note 2).

15 PREPAID BORROWING COSTS

As of 31 December 2018 and 31 December 2017, prepaid borrowing costs of RUB 5,756 and RUB 6,762, respectively, included credit agencies premiums and fees for arranging long-term credit facilities for the Group’s subsidiary, ZapSibNeftekhim LLC, for the ZapSib execution. The current portion of prepaid borrowing costs of RUB 4,091 and RUB 4,455 as of 31 December 2018 and 31 December 2017, respectively, is accounted for under loans and borrowings within one year from the reporting date.

F-60 23 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

16 TRADE AND OTHER RECEIVABLES

31 December 2018 31 December 2017 Receivables under project management and construction services 32,552 8,930 Trade receivables (net of impairment provisions of RUB 281 and RUB 241 as of 31 December 2018 and 31 December 2017, respectively) 15,721 16,411 Other receivables (net of impairment provisions of RUB 544 and RUB 263 as of 31 December 2018 and 31 December 2017, respectively) 3,512 2,818 Total trade and other receivables 51,785 28,159 Less non-current portion: Receivables under project management and construction services (5,336) (966) Other receivables (1,240) (1,442) 45,209 25,751

The fair values of trade and other receivables approximate their carrying values. All non-current receivables are due up to twenty years from reporting period date.

Accrual and release of the impairment provision have been recognized within other operating expenses in the consolidated statement of profit or loss. The Group applies IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade and other receivables.

To measure the expected credit loss, trade and other receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the historical payment profiles of sales, and the corresponding historical credit losses experienced. As a regular payment term specified for the majority of customers is prepayment or payment within 90 days the effect of adjustment on future expected losses is immaterial. Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, among others, the probability of insolvency or significant financial difficulties of the debtor. Impaired amounts are derecognized when they are assessed as uncollectible.

17 INVENTORIES

31 December 2018 31 December 2017 Refined products and work in progress 22,433 17,822 Materials and supplies 16,386 11,855 Goods for resale 1,648 2,057 Total inventories 40,467 31,734

As of 31 December 2018 and 31 December 2017, inventory write-downs amounted to RUB 191 and RUB 357, respectively. No significant reversals of previous inventory write-downs were made during the years ended 31 December 2018 and 31 December 2017.

F-61 24 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

18 PREPAYMENTS AND OTHER CURRENT ASSETS

31 December 2018 31 December 2017 Non-financial assets VAT receivable 12,461 8,818 Prepayments and advances to suppliers 6,394 7,828 Recoverable VAT 3,170 4,077 Other prepaid taxes and custom duties 1,408 750 Prepaid excise 1,294 1,344 Recoverable excise 758 835 Other current assets 1,023 224 Total non-financial assets 26,508 23,876 Financial assets Other financial assets 112 209 Total financial assets 112 209 Total prepayments and other current assets 26,620 24,085

19 BANK DEPOSITS

In October 2016, the Group signed a USD 414 million long-term deposit agreement due in March 2023. The main terms of the deposit agreement, including maturity schedule and interest rate, matched with the respective terms of the agreement, under which the Group had obtained a loan from the same bank. As the transaction meets the pass-through arrangement criteria, the long-term deposit and long-term loan were derecognized by the Group from its consolidated statement of financial position on the transaction date.

In March 2017 bank released the Group from a payment of the loan portion in the amount of USD 23,5 million, simultaneously deposit was decreased by the same amount and ruble equivalent of RUB 1,384 was returned to the Group; this development does not breach the pass-through arrangement criteria.

20 CASH AND CASH EQUIVALENTS

Cash and cash equivalents included deposits held in banks, which are readily convertible to cash and have an original maturity of less than three months, of RUB 10,002 and RUB 31,403 as of 31 December 2018 and 31 December 2017, respectively, and cash in transit in the amount of RUB 472 and RUB 1,798 as of 31 December 2018 and 31 December 2017, respectively.

F-62 25 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

21 LONG-TERM DEBT EXCLUDING RELATED TO ZAPSIBNEFTEKHIM

Long-term debt payable to Currency Due 31 December 2018 31 December 2017 Variable rate Bank GPB RUB 2023 22,000 22,000 Deutsche Bank EUR 2014-2023 4,274 4,589 Citibank USD 2021 695 - ING Bank Group EUR, USD 2011-2021 285 531 UniCredit Bank EUR 2013-2019 253 445 NPP Neftekhimia RUB 2020 - 175 Raiffeisen Bank USD 2019-2021 - 5,760 Fixed rate Russian ruble bonds RUB 2019-2021 30,000 30,000 Eurobonds 2023 USD 2023 21,285 28,616 UniCredit Bank Group RUB 2022 4,980 4,974 Monotowns Development Fund RUB 2021-2026 1,000 - Alfa-Bank USD 2019 - 14,400 Sberbank of Russia RUB 2020-2022 - 1,896 Gazprom mezhregiongaz RUB 2011-2018 - 233 Eurobonds 2018 USD 2018 - 25,528 Total long-term debt excluding related to ZapSibNeftekhim 84,772 139,147 Less: current portion (11,435) (27,361) 73,337 111,786

Eurobonds 2018. The nominal amount of notes outstanding as of 31 December 2017 was USD 443.2 million and it was paid in full in January 2018.

Eurobonds 2023. On 5 October 2017, the Group issued notes with nominal value USD 500 million in total on the Irish Stock Exchange, bearing 4.125 percent annual interest and maturing in 2023. The Group used the aggregate net proceeds from the notes issue for an early redemption of the Eurobonds 2018 issue and for general corporate purposes. In October 2018 the Group repurchased its Eurobonds 2023 with the nominal value of USD 192 million at a price of 97.4% of the par value for RUB 12,620.

The Group had no subordinated debt and no debts that may be converted into an equity interest in the Group.

The scheduled maturities of long-term debt excluding related to the ZapSib as of 31 December 2018 and 31 December 2017 are presented below:

31 December 2018 31 December 2017 Due for repayment: Between one and two years 11,181 25,639 Between two and five years 61,584 35,258 More than five years 572 50,889 Total long-term debt excluding related to ZapSibNeftekhim 73,337 111,786

The carrying amounts of long-term fixed-rate borrowings approximate their fair value as of 31 December 2018 and 31 December 2017, except for those, which fair value is disclosed in Note 35.

The carrying amounts of long-term debts with variable interest rates linked to LIBOR, EURIBOR or the Central Bank of Russia key interest rate approximate their fair value.

F-63 26 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

21 LONG-TERM DEBT EXCLUDING RELATED TO ZAPSIBNEFTEKHIM (СONTINUED)

As of 31 December 2018 and 31 December 2017, the Group had the following committed long-term credit facilities excluding related to the ZapSib:

Credit limit Undrawn amount As of 31 December 2018 USD-denominated (in millions of USD) 200 200 RUB-denominated (in millions of RUB) 10,000 10,000 As of 31 December 2017 USD-denominated (in millions of USD) 349 249 RUB-denominated (in millions of RUB) 6,000 6,000

As of 31 December 2018 and 31 December 2017, the total ruble equivalent of the Group’s undrawn committed long-term credit facilities excluding related to the ZapSib was RUB 23,894 and RUB 20,320, respectively.

22 LONG-TERM ZAPSIBNEFTEKHIM RELATED DEBT

Long-term debt payable to Currency Due 31 December 2018 31 December 2017 Variable rate National Wealth Fund financing USD 2030 121,574 100,800 Deutsche Bank (ECA financing) EUR 2020-2029 78,380 49,096 ING Bank Group (ECA financing) EUR 2013-2029 2,705 2,246 Citibank (ECA financing) USD 2013-2023 - 1,612 Fixed rate Vnesheconombank USD 2021-2025 16,564 - Credit Agricole (ECA financing) EUR 2019-2029 13,293 7,347 Russian Direct Investment Fund USD 2018-2020 13,258 12,096 Total long-term ZapSibNeftekhim related debt 245,774 173,197 Less: current portion (8,834) (2,485) 236,940 170,712

The scheduled maturities of long-term ZapSib related debt as of 31 December 2018 and 31 December 2017 are presented below:

31 December 2018 31 December 2017 Due for repayment: Between one and two years 15,587 7,382 Between two and five years 37,212 23,078 Between five and ten years 53,920 28,488 More than ten years 130,221 111,764 Total long-term ZapSibNeftekhim related debt 236,940 170,712

The carrying amounts of long-term fixed-rate borrowings approximate their fair value as of 31 December 2018 and 31 December 2017, except for those, which fair value is disclosed in Note 35.

The carrying amounts of long-term debt with variable interest rates linked to LIBOR, EURIBOR or USA CPI approximate their fair value.

F-64 27 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

22 LONG-TERM ZAPSIBNEFTEKHIM RELATED DEBT (СONTINUED)

As of 31 December 2018 and 31 December 2017, the Group had the following committed long-term ZapSib related credit facilities:

Credit limit Undrawn amount As of 31 December 2018 EUR-denominated (in millions of EUR) 2,151 902 As of 31 December 2017 EUR-denominated (in millions of EUR) 2,166 1,284 USD-denominated (in millions of USD) 400 400

As of 31 December 2018 and 31 December 2017, the total uble r equivalent of the Group’s undrawn committed long-term ZapSib related credit facilities was RUB 71,684 and RUB 111,495, respectively.

Total Group’s long-term debt both including and excluding related tothe ZapSib bore the following weighted average interest rates:R UB-denominated of 9.2 percent and 9.3 percent as of 31 December 2018 and 31 December 2017, respectively; USD-denominated of4.0 percent as of 31 December 2018 and 31 December 2017; and EUR-denominated of 1.1 percent and 1.2 percent as of 31 December 2018 and 31 December 2017, respectively.

23 DEFERRED INCOME FROM GRANTS AND SUBSIDIES

As a major investor in infrastructure and social projects in the regions where it operates, the Group has signed cooperation agreements with a number of regional authorities, including investment and financial support agreements. Under these agreements, the Group is entitled to a partial refund of capital expenditures and finance expenses incurred in the respective regions subject to certain conditions. Such reimbursements are made after supporting documents have been submitted to the relevant authority in the form of a direct grant of public funds.

2018 2017 Deferred income from grants and subsidies as of 1 January 48,720 41,082 Grants and subsidies received 9,687 11,274 Recognized in profit or loss (depreciation) (3,072) (3,636) Deferred income from grants and subsidies as of 31 December 55,335 48,720

F-65 28 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

24 OTHER NON-CURRENT LIABILITIES

31 December 2018 31 December 2017 Financial liabilities Payables under project management and construction services 4,253 914 Payables for acquisition of subsidiaries 3,523 5,792 Payables under accommodation program 2,801 2,278 Payables to contractors and suppliers of property, plant and equipment 1,279 2,778 Trade payables 50 223 Other liabilities 241 6 Total financial non-current liabilities 12,147 11,991 Non-financial liabilities Post-employment obligations 2,077 2,401 Payables to employees 1,661 2,181 Other liabilities - 2 Total non-financial non-current liabilities 3,738 4,584 Total other non-current liabilities 15,885 16,575

The Group maintains a cash-settled long-term incentive (LTI) plan. Among other factors, remuneration under the LTI plan is contingent upon the contribution that management makes toward increases in the Group’s business fair value, which is measured by changes in the Group’s business fair value divided by the median change in the business fair values of certain other international corporations operating in the petrochemical industry. The LTI plan requires that participants provide services to the Group within a specific time period. Remuneration granted is vested to each participant on an annual basis and in separate tranches. Each tranche equals 33.3 percent of the total remuneration granted, provided that the participant is continuously employed by the Group from the grant date until the applicable vesting date. Each tranche is accounted for as a separate arrangement and expensed, together with a corresponding increase within payables to employees in other non-current liabilities. The current portion of liabilities under the LTI plan is classified within payables to employees in trade and other payables. For the years ended 31 December 2018 and 31 December 2017, the Group recognized RUB 848 and RUB 915, respectively, as expenses under the LTI plan.

The carrying amounts of other non-current liabilities approximate their fair value.

25 TRADE AND OTHER PAYABLES

31 December 2018 31 December 2017 Financial liabilities Payables to contractors and suppliers of property, plant and equipment 44,210 41,009 Payables under project management and construction services 28,231 8,613 Trade payables 25,675 26,098 Payables for acquisition of subsidiaries 3,280 2,619 Interest payable 1,863 2,087 Other payables 825 514 Total financial trade and other payables 104,084 80,940 Non-financial liabilities Payables to employees 9,650 7,948 Advances from customers 4,958 5,163 Other payables 1,196 1,309 Total non-financial trade and other payables 15,804 14,420 Total trade and other payables 119,888 95,360

As of 31 December 2018 and 31 December 2017, payables to employees included provisions for annual and other bonuses, vacation accruals (including provision for social taxes) of RUB 9,623 and RUB 7,948, respectively.

F-66 29 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

26 SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT EXCLUDING RELATED TO ZAPSIBNEFTEKHIM

31 December 2018 31 December 2017 Short-term debt: RUB-denominated debt 1,865 - Current portion of long-term debt excluding related to ZapSibNeftekhim (Note 21): Russian ruble bonds 10,000 - Eurobonds 2018 - 25,528 Others 1,435 1,833 Total 13,300 27,361

As of 31 December 2018 the Group had committed short-term credit facilities excluding related to the ZapSib in euro and rubles. The total ruble equivalent of the Group’s undrawn committed short-term credit facilities excluding related to the ZapSib was RUB 27,084. As of 31 December 2017, the Group had no committed short-term credit facilities.

27 TAXES OTHER THAN INCOME TAX PAYABLE

31 December 2018 31 December 2017 VAT 9,130 6,918 Property tax 1,009 919 Social taxes 494 620 Other taxes 291 93 Total taxes other than income tax payable 10,924 8,550

28 SHAREHOLDERS’ EQUITY

On 14 December 2016, the Group’s shareholders entered into the sale of 10 percent stake in the Company’s share capital to the Silk Road Fund, an investment fund registered in China. The transaction was finalized in January 2017.

As of 31 December 2018 and 31 December 2017, the Group didn’t have direct parent company and an ultimate controlling shareholder.

Share capital. The share capital of PJSC SIBUR Holding (authorised, issued and paid-in) was RUB 21,784 as of 31 December 2018 and 31 December 2017, and consisted of 2,178,479,100 ordinary shares, each with a par value of ten Russian rubles.

Earnings per share. There were no events that would trigger dilution of earnings per share for the years ended 31 December 2018 and 31 December 2017.

Dividends. Dividends in the amount of RUB 25,728 (11.81 Russian rubles per share) and RUB 19,171 (8.80 Russian rubles per share) were paid during years ended 31 December 2018 and 31 December 2017, respectively.

F-67 30 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

29 NON-CONTROLLING INTEREST

The following table provides information about each significant subsidiary with a non-controlling interest:

Proportion of non-controlling Accumulated non- Proportion of interest’s voting controlling Place of non-controlling rights held, interest in the business interest, percent percent subsidiary Year ended 31 December 2018 JSC NIPIgaspererabotka Russia 55 50 7,710 JSC Krasnoyarsk Synthetic Rubbers Plant Russia 25 25 364 Others - - - (80) 7,994 Year ended 31 December 2017 JSC NIPIgaspererabotka Russia 55 50 4,749 JSC Krasnoyarsk Synthetic Rubbers Plant Russia 25 25 192 LNG NOVAENGINEERING LLC* Russia 55 50 99 Others - - - 12 5,052 *a subsidiary of JSC NIPIgaspererabotka

The summarised financial informationof JSC NIPIgaspererabotka before inter-company eliminations was as follows:

As of and for the year ended 31 December 2018 31 December 2017

Non-current assets 65,144 71,439 Current assets 133,115 52,000

Non-current liabilities 71,219 60,437 Current liabilities 113,002 54,292

Revenue 44,276 26,184

During the years ended 31 December 2018 and 31 December 2017 the Group’s subsidiary NIPIGAS distributed dividends to its shareholders.

F-68 31 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

30 INCOME TAX

The movement in deferred income tax assets and liabilities during the year was as follows:

(Charged)/ Reclassifi- Business (Charged)/ Reclassifi- credited to cations to assets combinations credited to cations to / 31 December profit or held 31 December and acquisi- profit or from assets 31 December 2018 loss/equity for sale 2017 tions loss/equity held for sale 2016 Tax effects of taxable temporary differences Property, plant and equipment (32,621) (6,990) 457 (26,088) 20 (3,255) - (22,853) Intangible assets (17,926) 1,173 - (19,099) - 1,188 - (20,287) Trade and other receivables (7,459) (860) 1 (6,600) - (3,762) 304 (3,142) Prepaid borrowing costs (1,349) - - (1,349) - 29 - (1,378) Debt (1,212) (354) - (858) - (103) - (755) Inventory (444) (281) - (163) - 186 - (349) Others (73) 33 - (106) - 31 - (137) Deferred tax liabilities (61,084) (7,279) 458 (54,263) 20 (5,686) 304 (48,901) Less: deferred tax assets offset 26,823 11,669 (379) 15,533 - 1,283 (296) 14,546 Total deferred tax liabilities (34,261) 4,390 79 (38,730) 20 (4,403) 8 (34,355) Tax effects of deductible temporary differences Tax loss carry-forwards 22,260 7,932 (232) 14,560 - (631) - 15,191 Grants and subsidies 6,877 (152) - 7,029 - (232) - 7,261 Payables to employees 2,422 330 (92) 2,184 - 342 - 1,842 Inventory 1,485 247 (28) 1,266 - 850 - 416 Trade and other payables 1,227 (365) (13) 1,605 - 930 - 675 Intangible assets 113 (9) (4) 126 - (21) - 147 Others 905 421 (10) 494 (10) 705 (296) 95 Deferred tax assets 35,288 8,403 (379) 27,264 (10) 1,943 (296) 25,627 Less: deferred tax liabilities offset (26,823) (11,669) 379 (15,533) - (1,283) 296 (14,546) Total deferred tax assets 8,465 (3,266) - 11,731 (10) 660 - 11,081 Total net deferred tax liabilities (25,796) 1,124 79 (26,999) 10 (3,743) 8 (23,274)

Differences between recognition criteria under Russian tax regulations and under IFRS have given rise to temporary differences between the carrying value of certain assets and liabilities for financial reporting and income tax purposes. The tax effect of changes in these temporary differences is recorded at the applicable statutory tax rate.

F-69 32 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

30 INCOME TAX (СONTINUED)

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realisation of the related tax benefits through future taxable profits is probable. Under the Russian Tax Code, during the period from 1 January 2017 to 31 December 2020 only up to 50% of a taxable income can be covered by tax losses carry-forward from previous periods. After 31 December 2020 a tax income can be covered by tax losses carry-forward from previous periods in full amount. Tax losses can be carried forward until fully recognized without time limitation.

Year ended 31 December 2018 2017 Current income tax: Current income tax on profits for the year 28,765 25,971 Adjustments for prior years (148) (43) Total current income tax 28,617 25,928 Deferred income tax: (Reversal)/accrual of temporary differences (1,124) 3,743 Total deferred income tax (1,124) 3,743 Total income tax expense 27,493 29,671

The tax on the Group’s profit before income tax differs from the theoretical amount that would arise if the Russian statutory tax rate to the consolidated profit was used as follows:

Year ended 31 December 2018 2017 Profit before income tax 138,253 149,917 Theoretical income tax expense at statutory rate of 20 percent (27,651) (29,983) Tax effect of items which are not deductible or assessable for taxation purposes: Non-deductible expenses (928) (667) Other non-taxable income 1,086 979 Total income tax expense (27,493) (29,671)

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes within one entity.

In April 2018, the Group’s subsidiaries Belozerny Gas Processing Complex LLC, Nizhnevartovsky Gas Processing Complex LLC and Nyagangazpererabotka LLC merged with JSC SiburTyumenGaz. The merger caused netting off the deferred income tax assets and liabilities in the amount of RUB 3 billion.

F-70 33 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

31 CASH GENERATED FROM OPERATIONS AND NET DEBT RECONCILIATION Year ended 31 December Notes 2018 2017 Profit before income tax 138,253 149,917 Adjustments to profit before income tax 6 Depreciation and amortization 35,510 35,486 Foreign exchange loss/(gain) from investing and financing activities, net 25,502 (9,495) 7 Unwinding of discount on non-current accounts payable 1,379 1,178 7 Interest expense 945 6,416 Reversal of provision for legal cases (395) (201) 6 (Gain)/loss on disposal of property, plant and equipment (4,503) 319 7 Bank commissions 52 783 Impairment/(reversal of impairment) of trade and other receivables 848 (72) Result of subsidiary’s acquisition and remeasurement of related liabilities 217 965 7 Pension liabilities 196 191 4, 6 Impairment of assets held for sale - 180 Discount on borrowings and non-current accounts payable (23) (93) 7, 19 Gain on the loan release - (1,384) Result of subsidiary’s disposal and remeasurement of related assets 425 (19,805) 6 Impairment of property, plant and equipment 416 164 Unwinding of discount on loans receivable and non-current accounts 7 receivable (124) (142) 7 Interest income (1,464) (2,012) 24, 25 Change in provision for bonuses 878 1,668 13 Share of net income of joint ventures and associates (3,173) (2,073) Other adjustments (143) (50) Operating cash flows before working capital changes 194,796 161,940 Changes in working capital Increase in advances received under project management and construction services 45,375 56,670 Increase in trade and other payables 26,127 17,660 Increase in taxes payable 2,413 2,878 Increase in trade and other receivables (25,138) (3,944) Increase in prepayments and other current assets (2,553) (7,744) Increase in inventories (8,082) (1,156) Increase in advances issued under project management and construction services (47,947) (53,987) Total changes in working capital (9,805) 10,377 Cash generated from operating activities before income tax payment 184,991 172,317 Income tax paid (24,582) (19,640) Net cash from operating activities 160,409 152,677

For the years ended 31 December 2018 and 31 December 2017, the reconciliation of net debt was as follows:

Cash and cash Long-term and Net debt equivalents short-term debt As of 1 January 2017 60,635 (341,813) (281,178) Cash flows (11,132) 23,087 11,955 Foreign exchange adjustments (1,047) 5,758 4,711 Other non-cash movements - 624 624 As of 31 December 2017 48,456 (312,344) (263,888)

As of 1 January 2018 48,456 (312,344) (263,888) Cash flows (36,734) 22,266 (14,468) Foreign exchange adjustments 3,061 (43,718) (40,657) Other non-cash movements - 1,385 1,385 As of 31 December 2018 14,783 (332,411) (317,628)

F-71 34 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

32 PRINCIPAL SUBSIDIARIES

Principal wholly owned operating subsidiaries of the Group:

BIAXPLEN LLC JSC Polief BIAXPLEN T LLC SIBUR Tobolsk LLC SIBUR International GmbH SIBUR Togliatti LLC JSC Sibur-Neftehim Tomskneftekhim LLC JSC SIBUR-PET JSC Sibur-Himprom JSC SIBUR-Trans JSC Voronezhsintezkauchuk SIBUR-Kstovo LLC JSC Siburenergomenedgment Zapsibtransgaz LLC ZapSibNeftekhim LLC JSC SiburTyumenGaz

Other principal operating subsidiaries of the Group:

Effective percent of share capital

held by the Group as of 31 December 2018 31 December 2017 JSC NIPIgaspererabotka 45 45 JSC Krasnoyarsk Synthetic Rubbers Plant 75 75

As of 31 December 2018 and 31 December 2017, the voting and ownership percentage in the Group’s subsidiaries with a non-controlling interest are the same, except for JSC NIPIgaspererabotka in which the Group had 50 percent voting rights.

The Group’s operating subsidiaries are registered and located in the Russian Federation, except for SIBUR International GmbH, an export trading company of the Group registered in Austria.

33 RELATED PARTIES

For the purposes of these consolidated financial statements, parties are generally considered to be related if the party is part of the Group’s key management or the Board of Directors; the party has the ability to control or jointly control the other party; both parties are under common control; or one party can exercise significant influence over the other party in the financial and operational decision-making process. In considering each possible related-party relationship, the Group’s management pays attention to the substance of the relationship, and not merely the entities’ legal form. Also, management applies judgement to decide whether party could exercise significant influence over the Group, considering not merely percentage of shareholding in the Group and governing bodies representation, but actual ability and participation in the Group's decision making.

The nature of the related-party relationships for those related parties with whom the Group entered into significant transactions during the years ended 31 December 2018 and 31 December 2017, or had significant balances outstanding as of 31 December 2018 and 31 December 2017, are presented below.

F-72 35 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

33 RELATED PARTIES (СONTINUED) a) Significant transactions with parties under the control or joint control of PROMSTROI GROUP

JSC PROMSTROI-GROUP, jointly with its subsidiaries (“PROMSTROI GROUP”), is one of the providers of construction services to the Group. In 2016, the Company and PROMSTROI GROUP signed a strategic partnership agreement aimed to develop a reliable local provider of construction services by the way of a) monitoring operational and financial performance of PROMSTROI GROUP on a long-term basis; b) jointly participating in the construction business opportunities as a local EPC contractor by combining an engineering and construction expertise of NIPIGAS and PROMSTROI GROUP. In 2016-2017, as the first step of the partnership agreement’s realization several Group’s representatives were appointed to the governing bodies of PROMSTROI GROUP under an agreement between JSC PROMSTROI-GROUP and the Group on the conditions of reimbursement of the Group’s costs.

Further in January 2018, the Group’s representatives got the positions of the Chief Executive Officer and the Chairman of the Board of Directors of PROMSTROI GROUP. Thus, the management of the Group has made a judgment that since 2018 the Group is able to exercise a significant influence over PROMSTROI GROUP and treated it as a related party in this consolidated financial statements.

The Group had the following transactions with PROMSTROI GROUP for the year ended 31 December 2018:

Operating and investing activities Purchases of construction services (14,279) Sales of materials and services 152

As of 31 December 2018, the Group had the following balances with PROMSTROI GROUP:

31 December 2018 Advances and prepayments for capital construction 2,144 Trade and other payables 1,291 Prepayments and advances to suppliers 857 Accounts payable to contractors and suppliers of property, plant

and equipment 201 Trade and other receivables 60

b) Remuneration of directors and key management

In January – March 2018 the Company’s Board of Directors comprised eleven individuals and since April 2018 comprised twelve individuals (during the year ended 31 December 2017, comprised of eleven individuals), including shareholder representatives. Members of the Board of Directors are entitled to annual compensation, as approved by the Annual General Shareholders’ Meeting.

During the years ended 31 December 2018 and 31 December 2017, the Company accrued RUB 102 and RUB 98 net of social taxes, respectively, to Board of Directors members as part of their compensation for the years 2018 and 2017.

F-73 36 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

33 RELATED PARTIES (СONTINUED)

During the year ended 31 December 2018, the number of key management personnel comprised 16 individuals. In January 2017, the number of key management personnel comprised 16 individuals and since February 2017 comprised 15 individuals. Key management personnel is entitled to salaries, bonuses, voluntary medical insurance and other employee benefits. Remuneration of key management personnel is determined by the terms set out in the relevant employment contracts and is substantially linked to the financial performance of the Group. Remuneration of key management personnel amounted to RUB 2,119 and RUB 1,836 net of social taxes for the years ended 31 December 2018 and 31 December 2017, respectively. c) Joint ventures

The Group had the following transactions with its joint ventures for the years ended 31 December 2018 and 31 December 2017:

Year ended 31 December 2018 2017 Operating and investing activities Purchases of materials, goods and services (11,128) (6,489) Purchases of processing services (972) (996) Sales of materials, goods and services 12,062 8,413

As of 31 December 2018 and 31 December 2017, the Group had the following balances with its joint ventures:

31 December 2018 31 December 2017 Trade and other receivables 1,561 702 Loans receivable 1,878 1,507 Trade and other payables 3,030 2,322 Short-term debt - 175

The Group provided and received loans to and from its joint ventures on the market terms.

The Group has a number of long-term contracts with joint ventures, including contracts for procurement of processing services and purchase of finished goods. Also, the Group has several agency arrangements with its joint ventures under which the Group is providing marketing, selling, construction management and procurement services. The agent remuneration earned by the Group under the agency arrangements is included in sales of materials, goods and services line. The balances outstanding under the agency arrangements are included into trade and other payables and receivables lines.

F-74 37 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

34 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS

Financial assets 31 December 2018 31 December 2017 Non-current financial assets Trade and other receivables 6,109 1,672 Loans receivable 1,878 1,501 Contingent consideration for the sale of SIBUR-Portenergo LLC 467 736 Other non-current financial assets 87 23 Total non-current financial assets 8,541 3,932 Current financial assets Cash and cash equivalents 14,783 48,456 Trade and other receivables 45,209 25,751 Other current financial assets 112 209 Total current financial assets 60,104 74,416 Total current and non-current financial assets 68,645 78,348

Financial liabilities 31 December 2018 31 December 2017 Non-current financial liabilities Financial liabilities at amortised cost: Other non-current liabilities 8,624 7,317 Debt 310,277 282,498 Financial liabilities at fair value: 1 1 Payables for the acquisition of Tobolsk HPP LLC 3,523 4,674 Total non-current financial liabilities 322,424 294,489 Current financial liabilities Financial liabilities at amortised cost: Trade and other payables 102,020 79,059 Debt 22,134 29,846 Financial liabilities at fair value: 1 1 Payables for the acquisition of Tobolsk HPP LLC 2,064 1,881 Total current financial liabilities 126,218 110,786 Total current and non-current financial liabilities 448,642 405,275

The Group’s activities are exposed to a variety of financial risks: market risk (including foreign currency exchange risk, cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management focuses on financial market unpredictability, and seeks to minimise potential adverse effects on its financial performance. The Group focuses on managing exposure to risks that could lead to a potential loss of RUB 1 billion or more.

Financial risk management is carried out by the central finance function. The Group’s treasury manages credit risks related to transactions with financial institutions and liquidity risk. Relevant business units manage credit risks related to operating activities in accordance with the Group policies.

Foreign exchange risk. As the Group operates internationally, exports its products to Europe and Asia, and has a substantial amount of foreign currency-denominated debt, it is exposed to foreign exchange risk.

F-75 38 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

34 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (СONTINUED)

The table below summarises the Group’s exposure to foreign currency exchange risk at the reporting date: Denominated in As of 31 December 2018 USD EUR Other currency Cash and cash equivalents 1,169 527 121 Trade and other receivables 2,275 18,676 1,744 Contingent consideration for the sale of SIBUR- Portenergo LLC 467 - - Total financial assets 3,911 19,203 1,865 Trade and other payables 14,560 39,168 1,729 Debt 173,376 99,191 - Total financial liabilities 187,936 138,359 1,729

Denominated in As of 31 December 2017 USD EUR Other currency Cash and cash equivalents 26,501 1,957 92 Trade and other receivables 3,667 3,126 429 Contingent consideration for the sale of SIBUR- Portenergo LLC 736 - - Total financial assets 30,904 5,083 521 Trade and other payables 5,915 26,653 1,824 Debt 188,857 64,208 - Total financial liabilities 194,772 90,861 1,824

The sensitivity analysis given in the table below reflects the hypothetical gain/(loss) that would occur assuming the Russian ruble had weakened/strengthened by 20 percent against the US dollar and euro and that there were no changes in the securities portfolio and other variables as of 31 December 2018 and 2017, respectively.

Increase in exchange rate 31 December 2018 31 December 2017 Effect on profit before income tax RUB / USD 20 percent (36,805) (32,774) RUB / EUR 20 percent (23,831) (17,156)

Decrease in exchange rate 31 December 2018 31 December 2017 Effect on profit before income tax RUB / USD 20 percent 36,805 32,774 RUB / EUR 20 percent 23,831 17,156

Cash flow and fair value interest rate risk. The Group is exposed to interest rate risk primarily due to short- and long-term debt at variable rates. Debt issued at fixed rates exposes the Group to fair value interest rate risk. As of 31 December 2018 and 2017, the Group’s debt at variable rates was denominated in Russian rubles, US dollars and euro (see Notes 21, 22, 26). As of 31 December 2018 and 2017, the Group’s interest-bearing assets were primarily comprised by loans receivable and cash deposits. The Group analyses its interest rate exposure on a regular basis. The Group’s management makes financial decisions after careful consideration of various scenarios, which may include refinancing, renewing existing positions or alternative financing.

F-76 39 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

34 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (СONTINUED)

If variable interest rates were higher/lower, assuming all other variables remain constant, the Group’s profit before income tax would change as follows:

Increase in floating rates by 31 December 2018 31 December 2017 Effect on profit before income tax RUB-denominated debt 10 percent (171) (172) USD-denominated debt 10 percent (135) (223)

Decrease in floating rates by 31 December 2018 31 December 2017 Effect on profit before income tax RUB-denominated debt 10 percent 171 172 USD-denominated debt 10 percent 135 223

Credit risk. The Group is exposed to credit risk primarily due to cash and cash equivalents, loans issued and customers credit risks.

The Group deposits cash and cash equivalents only in banks that have minimal risk of default within set credit limits at the deposit date.

A large portion of the Group’s receivables from domestic sales relates to large companies such as Rosneft, Gazprom Pererabotka and Novatek, with low credit risks. The Group’s export customers are also key market players such as BOREALIS AG, SHV Gas Supply & Risk Management, Gunvor SA. The Group sells its products on export sales based on prepayments or advances received or secures its export sales by letters of credit. The Group assesses the credit quality of its customers based on market segment, customer’s financial position, its market share, past experience and other relevant factors. Although economic factors affecting the Group’s customers influence cash collection of the Group’s accounts receivable, the Group’s management assesses that there is no significant risk of loss other than bad debts provided as of 31 December 2018.

As of 31 December 2018 and 2017, the maximum credit risk exposure due to accounts receivable was RUB 51,984 and RUB 28,391 respectively.

The Group estimates the fair value of its financial liabilities as a close-out amount that does not incorporate changes in credit risks.

The credit risk posed by off-balance sheet financial instruments is defined as the possibility of sustaining a loss as a result of another party to a financial instrument failing to adhere to the relevant contract. The Group uses the same credit policies in assuming conditional obligations as it does for on- balance sheet financial instruments, through established credit approvals, risk control limits and monitoring procedures.

F-77 40 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

34 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (СONTINUED)

The table below shows the credit limit and balance of cash and cash equivalents of the Group’s major counterparty groups as of the reporting date.

As of and for the year ended 31 December 2018 Bank equity Rating Credit limit for one bank Balance Major banks >=25,000 A+,BBB-, USD 200 mln, in individual cases 14,675 BB+, BB -unlimited Other banks Not set Not set Individually set 108 Total cash and cash equivalents 14,783

As of and for the year ended 31 December 2017 Bank equity Rating Credit limit for one bank Balance Major banks >=25,000 A+,BBB-, USD 200 mln, in individual cases 48,346 BB+, BB -unlimited Other banks Not set Not set Individually set 110 Total cash and cash equivalents 48,456

The Group did not exceed its credit limits during the reporting period, and the Group’s management does not expect any losses resulting from these counterparties’ non-performance. As of 31 December 2018 and 2017, the maximum credit risk exposure due to cash and cash equivalents was RUB 14,783 and RUB 48,456, respectively.

Liquidity risk and capital risk management. Liquidity risk management includes maintaining sufficient cash balances, available funding from an adequate amount of committed credit facilities, and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group’s management maintains funding flexibility by ensuring funds availability under committed credit lines and expected cash flows from operating activities. Management monitors rolling forecasts of the Group’s liquidity reserve, comprising the undrawn debt facilities (see Notes 21, 22, 26), and cash and cash equivalents on the basis of expected cash flow. This is carried out at the Group level on a monthly and annual basis. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet cash requirements while maintaining debt financing plans.

The table below analyses the Group’s non-derivative financial liabilities in relevant maturity groupings based on the remaining period at the reporting date up to the contractual maturity date.

Less than Between one Between two As of 31 December 2018 one year and two years and five years Over five years Debt 35,389 38,178 124,186 217,039 Trade and other payables 102,221 4,479 6,733 5,762 Total 137,610 42,657 130,919 222,801 As of 31 December 2017 Debt 41,949 44,601 83,950 222,096 Trade and other payables 78,698 4,749 6,974 5,939 Total 120,647 49,350 90,924 228,035

Guarantees issued by the Group as of 31 December 2018 and 31 December 2017 are disclosed in Note 13.

F-78 41 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

34 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (СONTINUED)

The Group monitors liquidity on the basis of the net debt to EBITDA ratio, which was calculated as net debt divided by EBITDA. Net debt is calculated as total debt less cash and cash equivalents.

EBITDA for any period means the Group’s profit or loss for the period adjusted for income tax expense, finance income and expenses, share of net income/loss of joint ventures and associates, depreciation and amortisation, impairment of property, plant and equipment, profit or loss on disposal of investments and other exceptional items.

In accordance with the Group’s financial policy the Group shall maintain a net debt to EBITDA ratio of no higher than 2.5 and an EBITDA to interest accrued ratio of no lower than 7. This policy is stricter than the relevant contractual requirements. The net debt to EBITDA ratio was 1.58 and 1.64 as of 31 December 2018 and 2017, respectively. The EBITDA to interest accrued ratio was 13.7 and 10.1 for the years ended 31 December 2018 and 2017, respectively.

The primary objectives of the Group’s liquidity management policy is to ensure a strong liquidity base to fund and sustain its business operations through prudent investment decisions as well as to maintain investor, market and creditor confidence to support its business activities.

35 FAIR VALUE OF FINANCIAL INSTRUMENTS

Recurring fair value measurements

Also, the Company should reimburse for all Tobolsk HPP cash inflows under its capacity supply contracts, which are specific to this industry revenue stream, guaranteed by the legislation of the Russian Federation, as the recovery of capital investments. Such reimbursements are payable on a monthly basis from the date of acquisition until 2020. During the years ended 31 December 2018 and 31 December 2017, the Company reimbursed cash inflows under its capacity supply contracts in the amount of RUB 2,035 and RUB 2,108, respectively.

The fair value of these financial instruments was determined using Level 3 measurements. For contingent consideration the sum of potential outcomes determined for different scenarios in which the Group realises synergies from integrating Tobolsk HPP into its production site infrastructure in Tobolsk, multiplied by the probability of each scenario. As of 31 December 2018 and 31 December 2017, the fair value of this contingent consideration was assessed as RUB 2,016 and RUB 1,818, respectively. The fair value of liability under capacity supply contracts was assessed based on the estimated future cash flows under the relevant capacity supply contracts discounted by the market interest rate for similar type of liabilities and amounting to RUB 3,571 and RUB 4,737 as of 31 December 2018 and 31 December 2017, respectively. The unwinding of discount on these liabilities amounting to RUB 816 and RUB 915 was recognized as a financial expense in the consolidated statement of profit or loss for the years ended 31 December 2018 and 31 December 2017, respectively.

F-79 42 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

35 FAIR VALUE OF FINANCIAL INSTRUMENTS (СONTINUED) b) Assets and liabilities not measured at fair value but for which fair value is disclosed

Liabilities carried at amortised cost. As of 31 December 2018 and 31 December 2017, the fair value of the Eurobonds 2023 (see Note 21) was RUB 20,794 and RUB 28,945, respectively. As of 31 December 2017, the fair value of the Eurobonds 2018 (see Note 21) was RUB 25,736. It was calculated based on Level 1 measurements such as quoted market prices. The fair values of other long- term and short-term debt carried at amortised cost were determined using valuation techniques. The estimated fair value of variable interest rate instruments linked to LIBOR, EURIBOR, USA CPI or the Central Bank of Russia key interest rate with stated maturity was estimated based on Level 2 measurements as expected cash flows discounted at current LIBOR, EURIBOR, USA CPI or the Central Bank of Russia key interest rate increased by the margin stipulated by the corresponding loan agreement. The estimated fair value of fixed interest rate instruments with stated maturity was estimated based on Level 3 measurements as expected cash flows discounted at current interest rates for new instruments with similar credit risk and remaining maturity. As of 31 December 2017, the fair value of the Russian ruble bonds with maturity date 26 March 2021 (see Note 21) was RUB 10,729. As of 31 December 2018 and 31 December 2017, the fair value of Credit Agricole Loan (see Note 22) was RUB 14,604 and RUB 8,107, respectively.

Other financial assets and liabilities. The carrying amounts of other financial assets and liabilities in the consolidated statement of financial position approximate their fair value, as determined based on Level 3 measurements.

36 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS

Operating environment. The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to varying interpretations.

The Russian economy was growing in 2018 and 2017. The economy is negatively impacted by low oil prices, ongoing political tension in the region and international sanctions against certain Russian companies and individuals. The financial markets continue to be volatile.

In the year 2014, the USA and the EU imposed a number of sectorial and personal sanctions against some of Russian companies and Russian citizens. These sanctions restrict certain US and EU persons and companies from providing financing, goods and services to certain entities. The Group considers these sanctions in its activities, continuously monitors them and analyses the effect of the sanctions on the Group’s financial position and results of operations. As of 31 December 2018 the Group was not subject to economic sanctions and restrictions imposed by the USA and the EU.

The operating environment has a significant impact on the Group’s operations and financial position. Management is taking necessary measures to ensure sustainability of the Group’s operations. However, the future effects of the current economic situation are difficult to predict and management’s current expectations and estimates could differ from actual results.

For the purpose of measurement of expected credit losses (“ECL”) the Group uses supportable forward- looking information, including forecasts of macroeconomic variables. As with any economic forecast, however, the projections and likelihoods of their occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different from those projected.

Legal proceedings. During the reporting period, the Group was involved in a number of lawsuits (as both plaintiff and defendant) arising in the ordinary course of business. Management believes there are no current legal proceedings or other outstanding claims that could have a material adverse effect on the Group’s operational results or financial position, and which have not been accrued or disclosed in the consolidated financial statements.

F-80 43 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

36 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS (СONTINUED)

Certain agreements under which the Group has disposed of various businesses and assets contain warranties and indemnities in favour of purchasers related to title, environmental and other matters. Although the Group’s potential obligations under such warranties and indemnities may be material, the scope of such potential obligations cannot be accurately assessed until a specific claim is filed.

Taxation. Russian tax, currency and customs legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and formal documentation supporting these tax positions may be challenged by tax authorities. There is a tendency in Russian Federation that Russian tax administration is gradually strengthening its awareness of the economic principles of taxpayers’ operations, including the fact that there is a higher likelihood of more focused attention from Russian tax authorities towards complex business arrangements or transactions with counterparties deemed potentially non bona fide by Russian tax authorities. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year when decisions about the review was made. Under certain circumstances reviews may cover longer periods.

Russian transfer pricing (TP) legislation is generally aligned with the international TP principles developed by the Organisation for Economic Cooperation and Development (OECD), although it has specific features. The TP legislation provides for the possibility of additional tax assessment for controlled transactions (transactions between related parties and certain transactions between unrelated parties) if such transactions are not on an arm’s-length basis. The Management has implemented internal controls to comply with current TP legislation.

Tax liabilities arising from controlled transactions are determined based on their actual transaction prices which established by the Group according to arm’s length principle. It is possible, with the evolution of the interpretation of TP rules, specific features and unclear practice of application of TP legislation in Russia, that such prices could be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the Group's operations.

The Group includes companies incorporated outside of Russia. Non-Russian companies of the Group may be subject to taxation in Russia if they are deemed to create a permanent establishment in Russia or if they are recognized as Russian tax residents based on the place of effective management and control. Appropriate procedures and controls are maintained in the Group to keep the said tax risks at an acceptable level.

Financial results of the foreign companies of the Group may be subject to tax in Russia in hands of PJSC “SIBUR Holding” under Controlled Foreign Company (CFC) legislation, unless they qualify for CFC tax exemption(s). Since virtually all foreign companies of the Group are either engaged in trading / provision of active services or generate losses for CFC purposes, these companies should reasonably qualify for CFC tax exemption or do not generate taxable profit above CFC taxation threshold, respectively; hence, the level of associated risk of challenge is assessed as not significant.

Russian tax legislation does not provide definitive guidance in certain areas and, as a result, is usually subject to varying interpretations by taxpayers. In such cases the Group adopts internally developed own tax positions of such uncertain areas based on analysis of relevant court cases and administrative practice, which estimated by the management as in line with applicable provisions of the Russian tax law and can probably be sustained. However, a risk that an outflow of resources will be required should such tax positions and interpretations be challenged by the tax authorities cannot be excluded. The impact of any such challenge was assessed as not significant to the financial condition and/or overall operations of the Group. Where the Group management believes it is probable that a position cannot be sustained, an appropriate amount has been accrued for in these consolidated financial statements.

F-81 44 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

36 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS (СONTINUED)

Environmental matters. The enforcement of environmental regulations in the Russian Federation is evolving, and the enforcement posture of government authorities is continually being reconsidered. The Group periodically evaluates its obligations under environmental regulations. Obligations are recognized as soon as they are determined. Potential liabilities that could arise as a result of changes in existing regulations, civil litigation or legislation, cannot be estimated, but could be material.

Management believes that there are no likely liabilities for environmental damage, that would have a materially adverse impact on the Group’s financial position or operating results.

Social commitments. The Group contributes to the maintenance and upkeep of the local infrastructure and the welfare of employees in those areas where it has production operations, including contributions to the construction, development and maintenance of housing, hospitals, transport services, recreational facilities and other social infrastructure. Such funding is expensed as incurred.

Operating lease commitments. The Group has two types of lease contracts in place: fixed-term agreements and continuous contracts. The vast majority of fixed-term contracts are non-cancellable before the expiry date and only a few of them may be terminated by the lessee at its sole discretion. The continuous contracts may be terminated by either party by giving proper notice of termination. The lease term is the non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option. Lease payments include payments for non-lease elements in the arrangement such as scheduled maintenance expenses, insurance expenses, pollution charges and related taxes. Payments for the non-lease elements are not specifically predetermined in the contracts and may vary depending on the level of servicing required. Accordingly, it would not be practicable to disclose them separately.

The Group’s operating lease commitments as of 31 December 2018 and 31 December 2017 were as follows:

31 December 2018 31 December 2017 Less than 1 year 4,278 10,254 From 1 year to 5 years 11,797 23,368 More than 5 years 675 1,218 Total operating lease commitments 16,750 34,840

The majority of the Group’s lease contracts are shipping vessels that the Group uses to transport its produced goods to customers. Related expenses are accounted as transportation and logistics within operating expenses in the consolidated statement of profit or loss.

As long as the Group has lease operations, there will be impact on the Group’s consolidated financial statements from adoption of the new standard IFRS 16 “Leases” that is effective for annual periods beginning on or after 1 January 2019. The Group intends to apply the modified retrospective approach as of 1 January 2019 and will not restate comparative amounts for 2018. Right-of-use assets will be measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses). When measuring lease liabilities, the Group discounted lease payment using its incremental borrowing rate as of 1 January 2019.

The Group will recognize additional right-of-use assets in the amounts of RUB 21,138 and lease liabilities in the same amount as of 1 January 2019. The expected impact on EBITDA of the Group for 2019 equals to RUB 5,957.

F-82 45 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

36 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS (СONTINUED)

The reconciliation of operating lease commitments and the amount of lease liability to be recognized as of 1 January 2019 is presented below:

Capital commitments. The Group has entered into contracts for the purchase of property, plant and equipment and construction services. As of 31 December 2018, the Group had contractual capital expenditure commitments of RUB 113,119, including RUB 105,064 related to the ZapSib (as of 31 December 2017: RUB 182,913, including RUB 174,855 related to the ZapSib), calculated as the contractual amount of construction contracts less cash paid under these contracts. The capital commitments should not be considered as binding since they can be cancelled on the sole management’s decision without any significant losses for the Group, except those liabilities, which were already recognized in the consolidated statement of financial position.

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation. These consolidated financial statements have been prepared in accordance with IFRS and interpretations issued by the IFRS Interpretations Committee (IFRS IC). Most of the Group’s companies maintain their accounting records in Russian rubles (RUB) and prepare their statutory financial statements in accordance with the Regulations on Accounting and Reporting of the Russian Federation (RAR). The consolidated financial statements are based on the statutory records of the Group’s companies, with adjustments and reclassifications recorded to ensure fair presentation in accordance with IFRS.

The consolidated financial statements have been prepared under the historical cost convention, except for certain financial assets and liabilities are measured at fair value; assets held for sale measured at fair value less costs to sell.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Consolidated financial statements. Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group 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 to direct the activities of the entity. The Group may have power over an investee even when it holds less than a majority of voting power in an investee. In such cases, the Group assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes in an investee’s activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee. Subsidiaries are consolidated from the date on which control is transferred to the Group (acquisition date) and are deconsolidated from the date on which such control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries. Identifiable assets acquired, as well as liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date, regardless of the extent of any non-controlling interest.

F-83 46 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

The Group measures non-controlling interest on a transaction-by-transaction basis, either at: a) fair value, or b) the non-controlling interest’s proportionate share of the acquiree’s net assets.

Goodwill is measured by deducting the acquiree’s net assets from the aggregate amount of the consideration transferred for the acquiree, as well as the amount of non-controlling interest in the acquiree and the fair value of the interest in the acquiree held immediately before the acquisition date. Any negative amount (“bargain purchase”) is recognized in profit or loss after management reassesses whether it identified all the assets acquired, all liabilities and contingent liabilities assumed, and reviews the appropriateness of their measurement.

The consideration transferred for the acquiree is measured at the fair value of the assets released, equity instruments issued, and liabilities incurred or assumed, including the fair values of assets or liabilities from contingent consideration arrangements, but excludes acquisition-related costs such as fees for advisory, legal, valuation and similar professional services. Transaction costs related to an acquisition and incurred for issuing equity instruments are deducted from equity; transaction costs incurred for issuing debt as part of a business combination are deducted from the carrying amount of the debt and all other transaction costs associated with the acquisition are expensed.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. In addition, unrealised losses are also eliminated unless the relevant cost cannot be recovered. The Company and all of its subsidiaries use uniform accounting policies that are consistent with the Group’s policies.

Assets and disposal groups classified as held for sale. Assets and disposal groups (which may include both non-current and current assets) are classified in the consolidated statement of financial position as “assets classified as held for sale” if their carrying amount will be recovered principally through a sale transaction (including loss of control over the subsidiary holding the assets) within 12 months after the reporting period and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.

Non-current assets or disposal groups classified as held for sale in the current period’s consolidated statement of financial position are not reclassified or presented again in the comparative consolidated statement of financial position to reflect the classification at the end of the current period.

Liabilities directly associated with the disposal group that will be transferred in the disposal transaction are reclassified and presented separately in the consolidated statement of financial position.

Property, plant and equipment. Property, plant and equipment items are stated at cost less accumulated depreciation and provision for impairment, wherever required.

Costs for minor repairs and day-to-day maintenance are expensed when incurred. The cost for replacing major parts or components of property, plant and equipment items is capitalized when it is probable that future economic benefits will flow to the Group, the cost of the item can be measured reliably, and the replaced part has been taken out of commission and derecognized. Gains and losses on disposals determined by comparing proceeds with carrying amounts are recognized in profit or loss.

An asset’s carrying amount is immediately recorded to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

F-84 47 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Depreciation. Depreciation of property, plant and equipment items is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives (except for depreciation of catalysers, which are depreciated using the unit-of-production method): Useful lives in years Buildings 20-60 Facilities 10-50 Machinery and equipment 5-30 Transport vehicles and other 5-20

The Group has a number of property, plant and equipment items, mainly temporary buildings and facilities, which are used for the project ZapSibNeftekhim (see Note 11). Due to its specifics, the estimated useful lives of such items could be lower than for similar types of the Group’s assets stated in the Group’s accounting policy.

The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the asset less the estimated costs of disposal if the asset was already of the age and in the condition expected at the end of its useful life. The residual value of an asset is assumed to be nil if the Group expects to use the asset until the end of its physical life.

Operating leases. Where the Group is a lessee in a lease that does not substantially transfer all the risks and rewards incidental to ownership from the lessor to the Group, the total lease payments are charged to profit or loss for the year on a straight-line basis over the lease term. The lease term is the non- cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.

Intangible assets a) Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the acquisition date. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses, if any. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill with respect to the entity sold.

Goodwill is allocated to cash-generating units for impairment testing. The allocation is made to those cash-generating units, or groups of cash-generating units, which are expected to benefit from the synergies as the result of the business combination. Such units or groups of units represent the lowest level at which the Group monitors goodwill and are not larger than an operating segment. b) Development costs directly associated with identifiable and unique software controlled by the Group are recorded as intangible assets if an inflow of incremental economic benefits exceeding costs is probable. Capitalized costs include employee benefit expenses of the software development team and an appropriate portion of relevant overheads. All other costs associated with computer software, e.g. its maintenance, are expensed when incurred. Development costs are carried at cost less accumulated amortisation. c) Research expenditure is recognized as an expense when incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognized as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and costs can be measured reliably. Other development expenditures are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. d) Other intangible assets with finite useful lives are carried at cost less accumulated amortisation.

F-85 48 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Impairment of non-financial assets. Assets with an indefinite useful life, goodwill for example, are not subject to amortisation and are tested annually for impairment. Assets subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Joint arrangements. Under IFRS 11 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 has assessed the nature of its joint arrangements and determined them to be joint ventures. Investments in joint ventures are accounted for by the equity method of accounting and are initially recognized at cost. Dividends received from joint ventures reduce the carrying value of the investment in joint ventures. The carrying amount of joint ventures includes goodwill identified on acquisition less accumulated impairment losses, if any. The Group’s share of the post-acquisition profit or loss of joint ventures is recorded in profit or loss for the year as a share of the net income of joint ventures. The Group’s share of other post-acquisition comprehensive income of joint ventures is recognized in the Group’s other comprehensive income.

When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, including any other unsecured receivables, the Group does not recognize any further losses, unless it has incurred obligations or made payments on behalf of the joint venture.

Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. In addition, unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Associates. Associates are entities over which the Group has significant influence (directly or indirectly), but not control. Investments in associates are accounted for using the equity method and are initially recognized at cost.

Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income are reclassified to profit or loss where appropriate.

F-86 49 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Inventories. Inventories are recorded at the lower of cost and net realisable value. The cost of inventory is assigned on a weighted average basis. The cost of finished goods and work in progress comprises raw material, direct labour, other direct costs and related production overheads, but nonetheless excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses.

Prepayments. Prepayments are carried at cost less allowance for impairment. A prepayment is classified as non-current when the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which itself will be classified as non-current upon initial recognition.

Cash inflows and outflows related to long-term deposits are classified within financing activities.

Starting from fourth quarter 2018, the Group reclassified grants and subsidies received for acquisition of property, plant and equipment from financing to investing activities. The effect of change in accounting policy is provided below:

Year ended 31 December 2017 As reported Adjustment As restated Investing activities Grants and subsidies received - 11,274 11,274 Net cash used in investing activities (117,309) 11,274 (106,035) Financing activities Grants and subsidies received 11,274 (11,274) - Net cash used in financing activities (46,500) (11,274) (57,774)

Provisions for liabilities and charges. Provisions for liabilities and charges are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation and so that a reliable estimate of the relevant amount can be made. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole.

A provision is recognized even if there is little likelihood of an outflow connected to any item included in the same class of obligations. Where the Group expects a provision to be reimbursed, under an insurance contract for example, the reimbursement is recognized as a separate asset but only when reimbursement is virtually certain. Provisions are reassessed at each reporting date and changes in the provisions are reflected in the profit or loss.

Provisions are measured at the present value of the expenditures expected to be required in order to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in a provision due to passage of time is recognized as interest expense.

F-87 50 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Value added tax. Output value added tax (VAT) related to sales is payable to the relevant tax authorities upon the earlier of a) collection of receivables from customers or b) delivery of goods or services to customers. Input VAT is generally recoverable against output VAT upon receipt of the relevant VAT invoice. The Russian tax authorities permit the settlement of VAT on a net basis. VAT related to sales and purchases that have not been settled at the reporting date (VAT recoverable and payable) is recognized on a gross basis and disclosed separately as a current asset and current liability, respectively. Where a provision has been made for expected credit loss of receivables, an impairment loss is recorded for the gross amount of the debtor, including VAT. The related VAT liability is maintained until the debt is written off for tax purposes.

Deferred income from grants and subsidies. Grants and subsidies are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all accompanying conditions. Grants and subsidies related to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the profit or loss: a) on a straight-line basis over the expected lives of the related assets, or b) in full when the assets are sold. Grants and subsidies received as compensation for non-capital expense are credited to profit or loss reducing the corresponding expense.

Share capital. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is presented as share premium.

Where the Group companies purchase the Company’s equity share capital, the consideration paid including any attributable transaction costs net of income taxes is deducted from total shareholders’ equity until the equity instruments are cancelled, sold or reissued. Where such shares are subsequently sold or reissued, any consideration received net of any directly attributable incremental transaction costs and the related income tax effects is included in shareholders’ equity. The gains (losses) arising from treasury shares transactions are recognized in the consolidated statement of changes in shareholders’ equity, net of associated costs including taxation.

Earnings per share. Earnings per share are determined by dividing the profit or loss attributable to equity holders of the Company by the weighted average number of participating shares outstanding during the reporting year.

Dividends. Dividends are recognized as a liability and deducted from equity at the reporting date only if they are declared before or on the reporting date. Dividends are disclosed when declared after the reporting date but before the consolidated financial statements are authorised for issue.

Purchases and sales of non-controlling interests. The Group applies the economic entity model to account for transactions with owners of non-controlling interests. The Group recognizes the difference between the purchase consideration and the carrying amount of non-controlling interests acquired and records it as a capital transaction directly in equity. Any difference between the sales consideration and carrying amount of non-controlling interests sold is also recognized as a capital transaction in the consolidated statement of changes in equity.

Current and deferred income tax. Income taxes are covered in the consolidated financial statements in accordance with Russian law as enacted, or substantively enacted, by the reporting date. The income tax charge or credit comprises current tax and deferred tax, and is recognized in profit or loss, unless it is recognized in other comprehensive income or directly in equity because it relates to transactions that are recognized, in the same or a different period, in other comprehensive income or directly in equity.

F-88 51 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Current income tax is the amount expected to be paid to or refunded by the tax authorities on taxable profits or losses for the current and prior periods. Deferred income tax is recognized using the balance sheet liability method for tax loss carry-forwards and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Under the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit.

Deferred tax assets and liabilities are netted only within individual Group companies. Deferred tax assets for deductible temporary differences and tax loss carry-forwards are recorded only to the extent that there are sufficient taxable temporary differences, or that it is probable there will be future taxable profit against which the deductions can be utilised.

The Group controls the reversal of temporary differences relating to taxes chargeable on dividends from subsidiaries or on gains at their disposal. The Group does not recognize deferred tax liabilities on such temporary differences except to the extent that management expects the temporary differences to reverse in the foreseeable future.

Taxes other than income tax, including VAT and excise tax are recorded within operating expenses.

Trade and other payables. Trade payables are accrued when a single counterparty has performed its obligations under a relevant contract, and are recognized initially at fair value plus transaction costs and subsequently carried at amortised cost using the effective interest method.

Post-employment obligations. Some Group companies provide retirement benefits to their retired employees. Entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of such benefits are accrued over the period of employment. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries.

Employee benefits. Wages, salaries and contributions to the Russian Federation state pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits (such as health services and kindergarten services) are accrued in the year in which the associated services are rendered to the Group’s employees.

Revenue recognition. The Group’s adoption of IFRS 15 “Revenue from Contracts with Customers” from 1 January 2018 led to changes in accounting policies. In the transition to IFRS 15, the Group has elected to apply a modified retrospective approach. The transition to IFRS 15 did not have a significant effect on the Group’s consolidated financial statements. Therefore, transition adjustment was recognized within retained earnings and trade and other receivables lines of the consolidated statement of financial position in the amount of RUB 425 as of 1 January 2018 and no additional disclosures are provided under IAS 11/18 for the year ended 31 December 2018.

The Group produces and sells a range of petrochemical products for domestic and international markets. Sales of goods are recognized when control of the products has transferred in accordance with each contract term. If the Group provides any additional services (such as transportation, etc.) to a customer after the control over goods has passed, the revenue from such services is considered to arise from a separate performance obligation, stated in the contract with a reference to delivery terms, and is recognized over the time that the service is rendered.

F-89 52 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Revenue on contracts that include variable consideration is recognized only to the extent that it is highly probable that there will be no significant reversal of such consideration. Contracts with customers do not contain a significant financing component. Sales are shown net of VAT, excise tax, export duties and other similar mandatory payments.

The Group is involved in construction and project management services where it may act as a principal or an agent. The Group acts as a principal if it obtains control over goods and services from other parties that it then combines with other goods and services in providing a specified promise to a customer. Revenue for contracts on construction services is recognized based on the input method by reference to costs incurred relative to the total expected costs, as the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

The Group gets unconditional right to consideration when a customer accepts acts of services rendered (progress billings). If the services rendered by the Group exceed progress billings and advances received for services not yet accepted by the customer, a contract asset is recognized. If the progress billings and advances received for services not yet accepted by the customer exceed the services rendered, a contract liability is recognized. Progress billings not yet paid by customers and retentions are included within trade accounts receivable.

Contract liabilities related to construction services are recognized within advances received under project management and construction services in the consolidated statement of financial position. Contract assets related to construction services are recognized within trade and other receivables in the consolidated statement of financial position. Prior to the transition to IFRS 15, the Group separately disclosed advances from customers (for services not yet accepted by customers) and the gross amount due to customers for contract work where progress billings exceeded revenue recognized. Both were recognized within advances received under project management and construction services in the consolidated statement of financial position. Contract liabilities that relate to contracts under which the Group sells its products to customers are recognized within advances from customers within trade and other payables line in the consolidated statement of financial position.

The Group recognizes revenue only to the extent of the costs incurred until such time that it can reasonably measure the outcome of the contract.

The Group accounts for the contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. The effect that the contract modification has on the transaction price, and on the Group’s measure of progress towards complete satisfaction of the performance obligation, is recognized as an adjustment to revenue at the date of the contract modification.

In an agency relationship, the Group satisfies its promise to a customer to arrange for the provision of the specified good or service by another party or parties. The Group’s revenue under such an arrangement represents the agency fee. The Group assesses whether it acts as an agent or as a principal on a contract-by-contract basis. Agency fee is recognized in the amount to which the Group has a right for consideration from customers, which is directly linked to the actual value of services delivered to customers.

F-90 53 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Accounting policy applied in 2017. Revenues from sales of goods were recognized for financial reporting purposes at the point of transfer of ownership risks and rewards, normally when the goods are shipped. If the Group agreed to transport goods to a specified location, revenue was recognized when the goods were delivered to the customer at the destination point. In an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal which do not result in increases in equity for the Group. Thus, revenue for such arrangements is the commission, received by the agent, and accounted on net basis. Revenues were measured at the fair value of the consideration received or receivable.

Construction contracts. Contract costs are recognized as expenses in the period in which they are incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognized over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. Variations in contract work, claims and incentive payments are included in contract revenue to the extent that has been agreed with the customer and the amounts are capable of being reliably measured.

The Group used the ‘percentage-of-completion’ method to determine the appropriate amount of revenue to recognize in a given period. The stage of completion is measured by reference to the contract costs incurred up to the statement of financial position date as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, prepayments or other assets, depending on their nature.

Financial instruments

Classification of financial assets. The Group’s adoption of IFRS 9 “Financial Instruments” from 1 January 2018 led to changes in accounting policies. The transition to IFRS 9 did not have a significant effect on the Group’s consolidated financial statements. The Group applied the new rules from 1 January 2018 with the practical expedients permitted under the standard. Comparatives for 2017 were not restated.

Business model as a tool for classifying financial instruments. The classification of financial assets for measurement purposes depends on the business model for managing those assets in order to generate cash flows and contractual cash flow characteristics of the asset. IFRS 9 prescribes the following: a) Hold to collect model: holding financial assets to collect contractual cash flows, where those cash flows solely represent payments of principal and interest. b) Hold to collect and sell model: holding financial assets to collect contractual cash flows and selling, where those cash flows solely represent payments of principal and interest. c) If a financial asset does not fall into one of the two prescribed business models, it is considered as held for trading.

Equity instruments. The Group classifies its financial assets in the form of equity instruments as measured at fair value (either through OCI, or through profit or loss).

For investments in equity instruments that are not held for trading, gains and losses will either be recorded in profit or loss or OCI, depending on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (“FVOCI”).

F-91 54 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Debt instruments. The Group classifies its financial assets in the form of debt instruments in the following measurement categories:

• those to be measured at fair value (either through OCI, or through profit or loss); • those to be measured at amortised cost.

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

Initial recognition of financial assets

Equity and debt instruments. At initial recognition, the Group measures a financial asset at its fair value, plus the transaction costs that are directly attributable to the acquisition of the financial asset if the financial asset is not measured at fair value through profit or loss (“FVPL”). Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Subsequent measurement of financial assets

Debt instruments. Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:

• Amortised cost: Assets are managed using the hold to collect business model. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented as finance income and expense. • FVOCI: Assets are managed using the hold to collect and sell business model. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses, which are recognized in profit or loss. When a financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in the finance income and expense line item. • FVPL: Assets that do not fall into any business model are held for trading and measured at FVPL. A gain or loss on a revaluation of debt investment that is subsequently measured at FVPL is recognized in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instruments. The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss upon the derecognition of the investment.

F-92 55 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Impairment

Debt instruments. From 1 January 2018, the Group assesses on a forward looking basis the expected credit losses (“ECL”) associated with its debt instruments and carried at amortised cost and FVOCI. For trade receivables and contract assets, the loss allowance is determined at initial recognition and throughout its life at an amount equal to the lifetime. The Group uses a provision matrix to estimate ECL for trade receivables. For other financial assets, the Group applies a significant increase in the credit risk model.

Impairment losses are presented in the operating expenses line item in the consolidated statement of profit or loss.

Derecognition of financial assets. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

Equity instruments. Changes in the fair value of equity instruments at FVPL are recognized in other gains/(losses) in the consolidated statement of profit or loss.

Classification of financial liabilities. Financial liabilities fall in the following measurement categories: fair value and amortised cost. Financial liabilities are measured at amortised cost, unless they are required to be measured at FVPL or the Group has opted to measure a liability at FVPL. Derivatives and held for trading liabilities are measured at FVPL with all fair value movements, including those related to changes in the credit risk of the liability, and recognized in profit or loss. Financial guarantees are initially recognized at fair value and subsequently measured at the higher of:

• the amount determined in accordance with the ECL; • the amount initially recognized less, where appropriate, the cumulative amount of income recognized in accordance with the principles of IFRS 15. Fees paid for the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs and presented as prepaid borrowing costs. The split-off between the short-term and long-term portion of prepaid borrowing cost is performed based on the expected schedule of the related financing withdrawal.

Capitalization of borrowing costs. Borrowing costs directly attributable to the acquisition, construction or production of assets that require considerable time to be prepared for their intended use or sale (qualifying assets) are capitalized as part of the costs for such assets. Capitalization of borrowing costs continues up to the date when the assets are substantially ready for their use or sale.

Effect of the initial application of IFRS 9 at the Group’s consolidated financial statements. The Group has reviewed its financial assets and liabilities and identified the following impact from the adoption of the new standard on 1 January 2018:

Assets. The Group’s debt instruments were previously classified as loans and receivables and measured at amortised cost, except for the contingent consideration for the sale of SIBUR-Portenergo LLC, which was classified as available for sale and measured at fair value.

The Group’s management has assessed which business models apply to the financial assets held by the Group and has classified its financial instruments into the appropriate IFRS 9 categories.

F-93 56 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Trade accounts receivables of SIBUR International GmbH were reclassified to the FVOCI measurement category due to “hold to collect and sell” model. This model has been selected for those trade accounts receivables of SIBUR International GmbH, which are intended to be sold under non-recourse factoring scheme. No material effect on equity identified.

All other financial assets satisfied the conditions for classification at amortised cost and there was no change to the measurement for these instruments.

Impairment. An analysis performed by the Group’s management determined that the amount of expected credit losses as at 1 January 2018 does not materially differ from the amount of recognized allowances in the consolidated financial statements as of 31 December 2017 and, therefore, there is no quantitative effect of the transition as of 1 January 2018.

Liabilities. There is no impact on the Group’s accounting and classification for financial liabilities. The requirements affect accounting and classification for financial liabilities that are designated at fair value through profit or loss. The only liabilities measured at fair value through profit or loss are contingent and deferred considerations for the purchase of Tobolsk HPP LLC (see Note 35). The Group believes no reclassification is required for the financial instruments and no material changes in carrying values is required. The derecognition rules were transferred from IAS 39 “Financial Instruments: Recognition and Measurement” and have not been changed.

Accounting policies applied until 31 December 2017.

Comparative information is presented with application Group’s previous accounting policy:

Classification of financial assets. The Group classified its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. Management determined the classification of its financial assets at initial recognition. a) Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it was acquired principally for the purpose of selling in the short term. Derivatives are also categorised as financial assets at fair value through profit or loss. Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the profit or loss in the period in which they arise. b) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They are included in current assets, except for maturities greater than 12 months after the reporting date, which are classified as non-current assets.

The Group’s loans and receivables included trade and other receivables, loans and notes receivable, and cash and cash equivalents in the consolidated statement of financial position. c) Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months from the reporting date.

Available-for-sale investments are carried at fair value. Interest income on available-for-sale debt securities is calculated using the effective interest method and recognized in profit or loss for the year as finance income. All other elements of changes in the fair value are recognized in other comprehensive income until the investment is derecognized or impaired at which time the cumulative gain or loss is reclassified from other comprehensive income to other operating income in profit or loss for the year.

F-94 57 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Impairment losses are recognized in profit or loss for the year when incurred as a result of one or more events (“loss events”) that occurred after the initial recognition of available-for-sale investments. A significant or prolonged decline in the fair value of an equity security below its cost is an indicator that it is impaired. The cumulative impairment loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognized in profit or loss – is reclassified from other comprehensive income to other operating expenses in profit or loss for the year.

Impairment losses on equity instruments are not reversed and any subsequent gains are recognized in other comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through current period’s profit or loss.

Classification of financial liabilities. Financial liabilities have the following measurement categories: a) held for trading, which also includes financial derivatives, and b) other financial liabilities. Liabilities held for trading are carried at fair value with changes in value recognized in profit or loss for the year (as finance income or finance expenses) in the period in which they arise. Other financial liabilities are carried at amortised cost. The Group’s other financial liabilities comprise of ‘trade and other payables’ and ‘long-term and short-term debt in the consolidated statement of financial position.

Financial instruments – key measurement terms. Depending on their classification financial instruments are carried at fair value or amortised cost as described below.

Derivative financial instruments are carried at their fair value. All derivative instruments are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of derivative instruments are included in profit or loss for the year. The Group does not apply hedge accounting.

Impairment of financial assets carried at amortised cost. Impairment losses are recognized in profit or loss when incurred as a result of one or more events (hereinafter “loss events”) that occurred after the initial recognition of the financial asset and which have an impact on the amount or timing of the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If the Group determines that no objective evidence exists that impairment was incurred for an individually assessed financial asset, whether significant or not, it includes the given asset in a group of financial assets with similar credit risk characteristics, and then collectively assesses them for impairment.

If the terms of an impaired financial asset held at amortized cost are renegotiated or otherwise modified because of the counterparty’s financial difficulties, impairment is measured using the original effective interest rate before the modification of terms. Impairment losses are always recognized through an allowance account to write down the asset’s carrying amount to the present value of expected cash flows (which exclude future credit losses that have not been incurred) discounted at the original effective interest rate of the asset. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

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 recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment loss is reversed by adjusting the allowance account through profit or loss.

F-95 58 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

37 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (СONTINUED)

Uncollectible assets are written off against the related impairment loss provision after all necessary procedures for recovering the asset have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are credited to the impairment loss account within the profit or loss for the year.

Debt. Debt is recognized initially at fair value, net of transaction costs incurred. Debt is subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of profit or loss over the period of the debt using the effective interest method.

Foreign currency transactions. The functional currency of each of the Group’s consolidated entities is the currency of the primary economic environment in which the given entity operates. The functional currency of the Company and most of its subsidiaries (including SIBUR International GmbH, an export trading company of the Group) and the Group’s presentation currency, is the national currency of the Russian Federation, the Russian ruble (RUB).

Monetary assets and liabilities held by Group entities as of 31 December 2018 and 2017 and denominated in foreign currencies are translated into RUB at the exchange rate prevailing at that date. Foreign currency transactions are accounted for at the exchange rate prevailing at the date of the transaction. Gains and losses from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in a foreign currency are recognized as exchange gains or losses in profit or loss.

The official exchange rates of the US dollar (USD) and euro (EUR) against the Russian ruble (RUB), as set by the Central Bank of Russia, are as follows:

USD/RUB EUR/RUB As of 31 December 2018 69.4706 79.4605 Year ended 31 December 2018 weighted average 62.7078 73.9546 As of 31 December 2017 57.6002 68.8668 Year ended 31 December 2017 weighted average 58.3529 65.9014

Segment reporting. Segments are reported in a manner consistent with the internal reporting as provided to the Group’s chief operating decision makers. Segments with revenue, operating profit or assets that represent ten percent or more of all segments are reported separately.

38 NEW ACCOUNTING DEVELOPMENTS

The following amended standards became effective from 1 January 2018, but did not have a material impact on the Group:

• Amendments to IFRS 2 “Share-based Payment” (issued on 20 June 2016); • Amendments to IFRS 4 (issued on 12 September 2016 and effective, depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption option, or when the entity first applies IFRS 9 for entities that choose to apply the overlay approach); • IFRIC 22 “Foreign Currency Transactions and Advance Consideration” (issued on 8 December 2016); • Annual Improvements to IFRSs 2014-2016 cycle (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018 for amendments to IFRS 1 and IAS 28); • Transfers of Investment Property – Amendments to IAS 40 (issued on 8 December 2016).

F-96 59 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

39 NEW ACCOUNTING PRONOUNCEMENTS

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2019 or later, and which the Group has not early adopted.

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

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

IFRIC 23 "Uncertainty over Income Tax Treatments" (issued on 7 June 2017 and effective for annual periods beginning on or after 1 January 2019). IAS 12 specifies how to account for current and deferred tax, but not how to reflect the effects of uncertainty. The interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. An entity should determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments based on which approach better predicts the resolution of the uncertainty. An entity should assume that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations. If an entity concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the effect of uncertainty will be reflected in determining the related taxable profit or loss, tax bases, unused tax losses, unused tax credits or tax rates, by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty. An entity will reflect the effect of a change in facts and circumstances or of new information that affects the judgments or estimates required by the interpretation as a change in accounting estimate. Examples of changes in facts and circumstances or new information that can result in the reassessment of a judgment or estimate include, but are not limited to, examinations or actions by a taxation authority, changes in rules established by a taxation authority or the expiry of a taxation authority's right to examine or re-examine a tax treatment. The absence of agreement or disagreement by a taxation authority with a tax treatment, in isolation, is unlikely to constitute a change in facts and circumstances or new information that affects the judgments and estimates required by the Interpretation.

IFRS 16 “Leases” (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognize: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The impact of new standard on consolidated financial statements is disclosed in Note 36.

F-97 60 PJSC SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian rubles, unless otherwise stated)

39 NEW ACCOUNTING PRONOUNCEMENTS (СONTINUED)

Annual Improvements to IFRSs 2015-2017 cycle - amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on 12 December 2017 and effective for annual periods beginning on or after 1 January 2019). The narrow scope amendments impact four standards. IFRS 3 was clarified that an acquirer should remeasure its previously held interest in a joint operation when it obtains control of the business. Conversely, IFRS 11 now explicitly explains that the investor should not remeasure its previously held interest when it obtains joint control of a joint operation, similarly to the existing requirements when an associate becomes a joint venture and vice versa. The amended IAS 12 explains that an entity recognizes all income tax consequences of dividends where it has recognized the transactions or events that generated the related distributable profits, eg in profit or loss or in other comprehensive income. It is now clear that this requirement applies in all circumstances as long as payments on financial instruments classified as equity are distributions of profits, and not only in cases when the tax consequences are a result of different tax rates for distributed and undistributed profits. The revised IAS 23 now includes explicit guidance that the borrowings obtained specifically for funding a specified asset are excluded from the pool of general borrowings costs eligible for capitalization only until the specific asset is substantially complete.

The following other new pronouncements are not expected to have any material impact on the Group when adopted:

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB). • Prepayment Features with Negative Compensation – Amendments to IFRS 9 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019). • Long-term Interests in Associates and Joint Ventures – Amendments to IAS 28 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019). • Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” (issued on 7 February 2018 and effective for annual periods beginning on or after 1 January 2019). • Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effective for annual periods beginning on or after 1 January 2020). • Definition of a business – Amendments to IFRS 3 (issued on 22 October 2018 and effective for acquisitions from the beginning of annual reporting period that starts on or after 1 January 2020). • Definition of materiality – Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for annual periods beginning on or after 1 January 2020).

CONTACT INFO

The Group’s Head Office:

PJSC SIBUR Holding 16/1 Krzhizhanovskogo St. Moscow, GSP-7, 117997 Russia Tel./fax: +7 (495) 777 5500 Website: www.sibur.ru (Russian) www.sibur.com (English)

F-98 61 PAO SIBUR Holding

International Financial Reporting Standards Consolidated Financial Statements and Independent Auditor’s Report

31 December 2017

F-99

Table of Contents

Independent Auditor’s Report

Notes to the IFRS Consolidated Financial Statements:

1 Nature of Operations ...... 6 2 Basis of Preparation and Significant Accounting Policies ...... 6 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies ...... 18 4 Acquisition and Deconsolidation of Subsidiaries and Transactions with Non-Controlling Interest ...... 21 5 Assets and Liabilities Classified as Held for Sale ...... 23 6 Revenue ...... 24 7 Operating Expenses ...... 24 8 Finance Income and Expenses ...... 25 9 Segment Information...... 25 10 Construction Contracts ...... 27 11 Earnings per Share ...... 27 12 Property, Plant and Equipment ...... 28 13 Advances and Prepayments for Capital Construction ...... 28 14 Goodwill and Intangible Assets ...... 29 15 Investments in Joint Ventures and Associates...... 30 16 Advances Issued and Received under Project Management Services ...... 36 17 Prepaid Borrowing Costs ...... 37 18 Trade and Other Receivables ...... 37 19 Other Non-Current Assets...... 38 20 Inventories ...... 39 21 Loans Receivable ...... 39 22 Prepayments and Other Current Assets ...... 40 23 Bank Deposits ...... 40 24 Cash and Cash Equivalents ...... 40 25 Long-Term Debt Excluding Related to ZapSibNeftekhim ...... 41 26 Long-Term ZapSibNeftekhim Related Debt ...... 42 27 Grants and Subsidies ...... 44 28 Other Non-Current Liabilities ...... 44 29 Trade and Other Payables ...... 45 30 Short-Term Debt and Current Portion of Long-Term Debt Excluding Related to ZapSibNeftekhim ...... 45 31 Taxes Other than Income Tax Payable ...... 45 32 Shareholders’ Equity ...... 46 33 Non-Controlling Interest ...... 47 34 Income Tax ...... 48 35 Cash Generated from Operations and Net Debt Reconciliation ...... 50 36 Principal Subsidiaries ...... 51 37 Related Parties ...... 51 38 Financial Instruments and Financial Risk Factors ...... 53 39 Fair Value of Financial Instruments ...... 57 40 Commitments, Contingencies and Operating Risks ...... 58 41 New Accounting Developments ...... 61 42 New Accounting Pronouncements ...... 61 Contact Info ...... 64

F-100 F-101 F-102 F-103 F-104 F-105 F-106 F-107 F-108 PAO SIBUR HOLDING IFRS CONSOLIDATED STATEMENT OF FINANCIAL POSITION (In millions of Russian roubles, unless otherwise stated)

As of 31 December Notes 2017 2016 Assets Non-current assets 12 Property, plant and equipment 605,315 435,002 13 Advances and prepayments for capital construction 69,015 95,998 4, 14 Goodwill 12,097 12,097 14 Intangible assets excluding goodwill 107,822 114,228 15 Investments in joint ventures and associates 33,673 31,757 34 Deferred income tax assets 11,731 11,081 16 Long-term advances issued under project management services 52,027 33,109 21 Loans receivable 1,501 - 17 Prepaid borrowing costs 2,307 3,432 18 Trade and other receivables 2,408 1,754 19 Other non-current assets 2,848 2,150 Total non-current assets 900,744 740,608 Current assets 20 Inventories 31,734 30,992 34 Prepaid current income tax 2,334 5,523 21 Loans receivable 13 971 18 Trade and other receivables 25,738 20,135 22 Prepayments and other current assets 24,085 16,381 16 Short-term advances issued under project management services 39,699 4,630 17 Prepaid borrowing costs 4,455 3,709 24 Cash and cash equivalents 48,456 60,635 Total current assets 176,514 142,976 4, 5 Assets classified as held for sale 6,568 2,641 Total assets 1,083,826 886,225 Liabilities and equity Non-current liabilities 25 Long-term debt excluding related to ZapSibNeftekhim 111,786 160,855 26 Long-term ZapSibNeftekhim related debt 170,712 158,770 27 Grants and subsidies 48,720 41,082 16 Long-term advances received under project management services 58,524 35,481 34 Deferred income tax liabilities 38,730 34,355 28 Other non-current liabilities 16,575 12,390 Total non-current liabilities 445,047 442,933 Current liabilities 29 Trade and other payables 95,360 50,007 16 Short-term advances received under project management services 39,558 5,931 34 Income tax payable 1,611 2,213 Short-term debt and current portion of long-term debt excluding 30 related to ZapSibNeftekhim 27,361 21,273 26 Current portion of long-term ZapSibNeftekhim related debt 2,485 915 31 Taxes other than income tax payable 8,550 5,615 Total current liabilities 174,925 85,954 4, 5 Liabilities associated with assets classified as held for sale 6,696 600 Total liabilities 626,668 529,487 Equity 32 Ordinary share capital 21,784 21,784 Share premium 9,357 9,357 37 Equity-settled share-based payment plans 32,450 32,450 Retained earnings 388,515 290,889 Total equity attributable to the shareholders of the parent company 452,106 354,480 33 Non-controlling interest 5,052 2,258 Total equity 457,158 356,738 Total liabilities and equity 1,083,826 886,225

The accompanying notes on pages 6 to 64 are an integral part of these consolidated financial statements

F-109 2 PAO SIBUR HOLDING IFRS CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions of Russian roubles, unless otherwise stated)

Year ended 31 December Notes 2017 2016 Operating activities 35 Cash from operating activities before income tax payment 172,317 150,606 Income tax paid (19,640) (12,912) 35 Net cash from operating activities 152,677 137,694 Investing activities Purchase of property, plant and equipment (131,765) (141,862) Purchase of intangible assets and other non-current assets (3,496) (3,831) 4 Acquisition of interest in subsidiary, net of cash acquired (2,227) (2,765) 4 Proceeds from disposal of subsidiary, net of cash disposed 22,136 3,445 Income tax paid on the disposal of subsidiary (3,471) - Additional contributions to the share capital of joint ventures and 15 associates (2,075) (4,076) 15 Dividends received 2,247 2,573 Interest received 1,877 672 15, 21 Loans issued (1,493) (1,268) Repayment of loans receivable 971 4,438 Proceeds from sale of property, plant and equipment 65 283 Other (78) 148 Net cash used in investing activities (117,309) (142,243) Financing activities Proceeds from debt 73,411 177,628 Repayment of debt (96,498) (215,569) 23 Loan settlement arrangement - (26,095) Interest paid (14,655) (21,894) 32, 33 Dividends paid (19,709) (16,163) Sale of currency under swap agreements - (10,072) Proceeds under swap agreements - 8,002 Placement of deposits - (3,342) Return of deposits - 3,208 Bank commissions paid (1,707) (3,239) 27 Grants and subsidies received 11,274 1,723 23 Return of deposit under loan settlement arrangement 1,384 - Proceeds from sale of non-controlling interest - 1,500 Purchase of non-controlling interest - (405) Net cash used in financing activities (46,500) (104,718) Effect of exchange rate changes on cash and cash equivalents (1,047) (2,181) Net decrease in cash and cash equivalents (12,179) (111,448) Cash and cash equivalents, at the beginning of the reporting year 60,635 172,083 Cash and cash equivalents, at the end of the reporting year 48,456 60,635

The accompanying notes on pages 6 to 64 are an integral part of these consolidated financial statements

F-110 3 PAO SIBUR HOLDING IFRS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(In millions of Russian roubles, unless otherwise stated)

Attributable to the shareholders of the parent company Equity- settled Non- share-based control- Share Share payment Retained ling Total Notes capital premium plans earnings Total interest equity Balance as of 31 December 2015 21,784 9,357 32,450 193,900 257,491 1,216 258,707 Profit for the year - - - 111,139 111,139 1,950 113,089 Actuarial gain on post-employment benefit obligations - - - 98 98 7 105 Total comprehensive income for the year - - - 111,237 111,237 1,957 113,194 Transactions with non-controlling 3, 4, interest in 33 subsidiaries - - - 65 65 935 1,000 32, 33 Dividends - - - (14,313) (14,313) (1,850) (16,163) Balance as of

31 December 2016 21,784 9,357 32,450 290,889 354,480 2,258 356,738 Profit for the year - - - 116,909 116,909 3,337 120,246 Actuarial loss on post-employment benefit obligations - - - (112) (112) (5) (117) Total comprehensive income for the year - - - 116,797 116,797 3,332 120,129 32, 33 Dividends - - - (19,171) (19,171) (538) (19,709) Balance as of 31 December 2017 21,784 9,357 32,450 388,515 452,106 5,052 457,158

The accompanying notes on pages 6 to 64 are an integral part of these consolidated financial statements

F-111 4 PAO SIBUR HOLDING IFRS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In millions of Russian roubles, unless otherwise stated)

Year ended 31 December 2017 2016 Profit for the year 120,246 113,089 Other comprehensive (loss)/income: (117) 105 Items that will not be reclassified to profit or loss: Actuarial (loss)/gain on post-employment benefit obligations (157) 153 Deferred tax effect 40 (48) Total comprehensive income for the year 120,129 113,194 Total comprehensive income for the year, including attributable to: 120,129 113,194 Non-controlling interest 3,332 1,957 Shareholders of the parent company 116,797 111,237

The accompanying notes on pages 6 to 64 are an integral part of these consolidated financial statements

F-112 5 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

1 NATURE OF OPERATIONS

PAO SIBUR Holding (the “Company”) and its subsidiaries (jointly referred to as the “Group”) form a vertically integrated gas processing and petrochemical business. The Group purchases and processes raw materials (primarily associated petroleum gas and natural gas liquids), and produces and markets energy and petrochemical products, both domestically and internationally.

The Group’s overall sales have no material exposure to seasonal factors. The Group’s production facilities are located in the Russian Federation.

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC). Most of the Group’s companies maintain their accounting records in Russian roubles (RR) and prepare their statutory financial statements in accordance with the Regulations on Accounting and Reporting of the Russian Federation (RAR). The consolidated financial statements are based on the statutory records of Group’s companies, with adjustments and reclassifications recorded to ensure fair presentation in accordance with IFRS.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the initial recognition of financial instruments based on fair value, the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) categorised at fair value through profit or loss. The preparation of consolidated financial statements under IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement when applying the Group’s accounting policies. Those areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.

Consolidated financial statements. Subsidiaries are those investees, including structured entities, that the Group controls because the Group has (i) the power to direct relevant activities of the investees that significantly affect their returns, (ii) exposure, or rights, to variable returns from its involvement with the investees, and (iii) the ability to use its power over the investees to affect the amount of an investor’s returns. The existence and effect of substantive rights, including substantive potential voting rights, are considered when assessing whether the Group has power over another entity. For a right to be substantive, the holder must have the practical ability to exercise that right when decisions about the direction of the relevant activities of the investee need to be made. The Group may have power over an investee even when it holds less than a majority of voting power in an investee. In such cases, the Group assesses the size of its voting rights relative to the size and dispersion of holdings of the other vote holders to determine if it has de-facto power over the investee. Protective rights of other investors, such as those that relate to fundamental changes in an investee’s activities or apply only in exceptional circumstances, do not prevent the Group from controlling an investee. Subsidiaries are consolidated from the date on which control is transferred to the Group (acquisition date) and are deconsolidated from the date on which such control ceases.

The Group measures non-controlling interest on a transaction-by-transaction basis, either at: a) fair value, or b) the non-controlling interest’s proportionate share of the acquiree’s net assets.

F-113 6 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Goodwill is measured by deducting the acquiree’s net assets from the aggregate amount of the consideration transferred for the acquiree, as well as the amount of non-controlling interest in the acquiree and the fair value of the interest in the acquiree held immediately before the acquisition date. Any negative amount (“negative goodwill”) is recognized in profit or loss after management reassesses whether it identified all the assets acquired, all liabilities and contingent liabilities assumed, and reviews the appropriateness of their measurement.

Non-controlling interest is the part of a subsidiary’s net results and equity that is attributable to interests that the Group does not own, either directly or indirectly. Non-controlling interest forms a separate component of the Group’s equity.

Property, plant and equipment. Property, plant and equipment items are stated at cost, restated to the equivalent purchasing power of the Russian rouble as of 31 December 2002 for assets acquired prior to 1 January 2003, less accumulated depreciation and provision for impairment, wherever required.

Costs for minor repairs and day-to-day maintenance are expensed when incurred. The cost for replacing major parts or components of property, plant and equipment items is capitalised when it is probable that future economic benefits will flow to the Group, the cost of the item can be measured reliably, and the replaced part has been taken out of commission and derecognized. Gains and losses on disposals determined by comparing proceeds with carrying amounts are recognised in profit or loss.

An asset’s carrying amount is immediately recorded to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

F-114 7 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Group has a number of property, plant and equipment items, mainly temporary buildings and facilities, which are used for the project ZapSibNeftekhim (see Note 13). Due to its specifics, the estimated useful lives of such items could be lower than for similar types of the Group’s assets stated in the Group’s accounting policy.

The useful lives are reviewed annually with due consideration of the nature of the assets, existing practices regarding their repair and maintenance , their intended use and technological evolution. A change in the useful life of a property, plant and equipment item is handled as a change in accounting estimate and is accounted for on a prospective basis.

F-115 8 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) c) Research expenditure is recognized as an expense when incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognized as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and costs can be measured reliably. Other development expenditures are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. d) Other intangible assets with finite useful lives are carried at cost less accumulated amortisation.

Amortisation is calculated using the straight-line method to allocate the cost of intangible assets over their estimated useful lives. Supply contracts are amortised during the contract maturity from 5 to 19 years. The useful lives are reviewed annually taking into consideration the nature of the intangible assets. Annually, at each reporting date, management assesses whether there is any indication of impairment of intangible assets. If impaired, the carrying amount of intangible assets is written down to the higher of value in use and fair value less costs to sell.

Associates. Associates are entities over which the Group has significant influence (directly or indirectly), but not control, generally resulting from a shareholding of between 20 and 50 percent of voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. Dividends received from associates reduce the carrying value of investments in associates. The carrying amount of associates includes goodwill identified on acquisition less accumulated impairment losses, if any. The Group’s share of the post-acquisition profit or loss of associates is recorded in profit or loss for the year as a share of the net income of associates. The Group’s share of other post-acquisition comprehensive income of associates is recognized in the Group’s other comprehensive income.

F-116 9 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

When the Group’s share of the losses of an associate equals or exceeds its interest in an associate, including any other unsecured receivables, the Group does not recognise any further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. In addition, unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

Loans and receivables. Loans and receivables are recognized initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest method amount less a provision made for impairment of these receivables.

Prepayments. Prepayments are carried at cost less provision for impairment. A prepayment is classified as non-current when the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which will itself be classified as non-current upon initial recognition. Prepayments to acquire assets are transferred to the carrying amount of an asset once the Group has obtained control of the asset and it is probable that future economic benefits associated with the asset will flow to the Group. Other prepayments are written off to profit or loss when the goods or services relating to the prepayments are received. If there is an indication that the assets, goods or services relating to a prepayment will not be received, the carrying value of the prepayment is recorded accordingly and a corresponding impairment loss is recognized in profit or loss for the year.

Cash and cash equivalents. Cash and cash equivalents include cash in hand, deposits held on call with banks, and other short-term, highly liquid investments with original maturities of three months or less. Cash and cash equivalents are carried at amortised cost using the effective interest method. Restricted balances are excluded from cash and cash equivalents for the purposes of the consolidated statement of cash flows. Balances restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period are included in other non-current assets. Foreign exchange gains and losses from deposits held on call with banks are classified as foreign exchange gains or losses from operating activities.

Cash inflows and outflows related to long-term deposits are classified within financing activities.

F-117 10 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Value added tax. Output value added tax (VAT) related to sales is payable to the relevant tax authorities upon the earlier of a) collection of receivables from customers or b) delivery of goods or services to customers. Input VAT is generally recoverable against output VAT upon receipt of the relevant VAT invoice. The Russian tax authorities permit the settlement of VAT on a net basis. VAT related to sales and purchases that have not been settled at the reporting date (VAT recoverable and payable) is recognized on a gross basis and disclosed separately as a current asset and current liability, respectively. Where a provision has been made for impairment of receivables, an impairment loss is recorded for the gross amount of the debtor, including VAT. The related VAT liability is maintained until the debt is written off for tax purposes.

Grants and subsidies. Grants and subsidies are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all accompanying conditions. Grants and subsidies related to the purchase of property, plant and equipment are included in non- current liabilities as deferred income and are credited to the profit or loss: a) on a straight-line basis over the expected lives of the related assets, or b) in full when the assets are sold. Grants and subsidies received as compensation for non-capital expense are credited to profit or loss reducing the corresponding expense.

Where grants are seen as a mechanism to finance acquisition of property, plant and equipment the cash inflows are shown as a financing activity.

Fees paid for the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs and presented as prepaid borrowing costs. The split-off between the short-term and long-term portion of prepaid borrowing cost is performed based on the expected schedule of the related financing withdrawal.

F-118 11 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

To the extent there is no evidence of the probability that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the relevant facility.

Capitalisation of borrowing costs. Borrowing costs directly attributable to the acquisition, construction or production of assets that require considerable time to be prepared for their intended use or sale (qualifying assets) are capitalised as part of the costs for such assets if the commencement date for capitalisation occurred on or after 1 January 2009.

Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use or sale.

The Group capitalises borrowing costs that could have been avoided if it had not made capital expenditures on qualifying assets. Capitalised borrowing costs are calculated at the Group’s average funding cost (the weighted average interest cost is applied to the expenditures on the qualifying assets), except to the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset. Where this occurs, actual borrowing costs incurred, less any investment income on the temporary investment of the borrowings, are capitalised.

Purchases and sales of non-controlling interests. The Group applies the economic entity model to account for transactions with owners of non-controlling interests. The Group recognises the difference between the purchase consideration and the carrying amount of non-controlling interests acquired and records it as a capital transaction directly in equity. Any difference between the sales consideration and carrying amount of non-controlling interests sold is also recognized as a capital transaction in the consolidated statement of changes in equity.

F-119 12 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Group controls the reversal of temporary differences relating to taxes chargeable on dividends from subsidiaries or on gains at their disposal. The Group does not recognise deferred tax liabilities on such temporary differences except to the extent that management expects the temporary differences to reverse in the foreseeable future.

Taxes other than income tax, including VAT and excise tax are recorded within operating expenses.

Post-employment obligations. Some Group companies provide retirement benefits to their retired employees. Entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of such benefits are accrued over the period of employment using the same accounting methodology used for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries.

Equity-settled share-based payment plans. The share option programme allows the Group’s management to hold shares in the Company. The fair value of the options is measured at the grant date and is spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured at the fair value for the underlying shares calculated at the grant date using a valuation model that takes into account the terms and conditions of the options granted. Each tranche is accounted for as a separate arrangement and expensed, together with a corresponding increase in shareholder’s equity, on a straight-line basis over the vesting periods.

Revenue recognition. Revenues from sales of goods are recognized for financial reporting purposes at the point of transfer of ownership risks and rewards, normally when the goods are shipped. If the Group agrees to transport goods to a specified location, revenue is recognized when the goods are delivered to the customer at the destination point. In an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal which do not result in increases in equity for the Group. Thus, revenue for such arrangements is the commission, received by the agent, and accounted on net basis.

Sales are shown net of VAT, excise tax, export duties and other similar mandatory payments. Revenues are measured at the fair value of the consideration received or receivable.

Interest income is recognized on a time-proportion basis using the effective interest method.

F-120 13 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Group uses the ‘percentage-of-completion’ method to determine the appropriate amount of revenue to recognize in a given period. The stage of completion is measured by reference to the contract costs incurred up to the statement of financial position date as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, prepayments or other assets, depending on their nature.

The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognized profits (less recognized losses) exceed progress billings, which are acts of services rendered signed by customers. Progress billings not yet paid by customers and retentions are included within trade accounts receivable. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognized profits (less recognized losses).

Classification of financial assets. The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it was acquired principally for the purpose of selling in the short term. Derivatives are also categorised as financial assets at fair value through profit or loss. Assets in this category are classified as current assets as they are expected to be settled within 12 months from the reporting date. Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the profit or loss in the period in which they arise. b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They are included in current assets, except for maturities greater than 12 months after the reporting date, which are classified as non-current assets.

The Group’s loans and receivables include trade and other receivables, loans and notes receivable, and cash and cash equivalents in the consolidated statement of financial position. c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months from the reporting date.

F-121 14 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Financial instruments – key measurement terms. Depending on their classification financial instruments are carried at fair value or amortised cost as described below.

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is a price quoted in an active market. An active market is one where transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

The fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the quantity held by the entity. This is the case even if a market’s normal daily trading volume is insufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price.

A portfolio of other financial assets and liabilities that are not traded in an active market is measured at the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received from selling a net long position (i.e. an asset) for a particular risk exposure or paid to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date.

This is applicable for assets carried at fair value on a recurring basis if the Group: (a) manages the group of financial assets and financial liabilities on the basis of the entity’s net exposure to a particular market risk (or risks) or to the credit risk of a particular counterparty in accordance with the entity’s documented risk management or investment strategy; (b) it provides information on that basis about the group of assets and liabilities to the entity’s key management personnel; and (c) the market risks, including duration of the entity’s exposure to a particular market risk (or risks) arising from the financial assets and financial liabilities is substantially the same.

F-122 15 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consideration of the investees’ financial data are used to measure the fair value of certain financial instruments for which external market pricing information is unavailable. Fair value measurements are analysed according to their levels in the fair value hierarchy as follows: (i) level one are measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuation techniques with all material inputs observable for the given asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires significant unobservable inputs). No transfers between the levels of the fair value hierarchy are deemed to have occurred during the reporting period.

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs.

Amortised cost is the amount at which the financial instrument was recognized at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any write-down for incurred impairment losses. Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination, if any), are not presented separately and are, instead, included in the carrying values of related items in the consolidated statement of financial position.

The effective interest method is a method for allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the net carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next date for establishing a new interest price, except for the premium or discount which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees paid or received between parties to the contract which are an integral part of the effective interest rate.

Derivative financial instruments, including interest rate futures, forward rate agreements, currency and interest rate swaps, currency and interest rate options are carried at their fair value. All derivative instruments are carried as assets when fair value is positive and as liabilities when fair value is negative. Changes in the fair value of derivative instruments are included in profit or loss for the year. The Group does not apply hedge accounting.

F-123 16 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 any portion or instalment is overdue and the late payment cannot be attributed to a delay caused by settlement systems;  the counterparty experiences a significant financial difficulty as evidenced by its financial information which the Group has obtained;  the counterparty is considering bankruptcy or a financial reorganisation;  there is an adverse change in the payment status of the counterparty as a result of changes in national or local economic conditions that impact the counterparty; or  the value of collateral, if any, significantly decreases as a result of deteriorating market conditions.

Monetary assets and liabilities held by Group entities as of 31 December 2017 and 2016 and denominated in foreign currencies are translated into RR at the exchange rate prevailing at that date. Foreign currency transactions are accounted for at the exchange rate prevailing at the date of the transaction. Gains and losses from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in a foreign currency are recognized as exchange gains or losses in profit or loss.

F-124 17 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The official exchange rates of the US dollar (USD) and euro (EUR) against the Russian rouble (RR), as set by the Central Bank of Russia, are as follows:

USD/RR EUR/RR As at 31 December 2017 57.6002 68.8668 2017 weighted average 58.3529 65.9014 As at 31 December 2016 60.6569 63.8111 2016 weighted average 67.0349 74.2310

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The Group formulates estimates and assumptions that affect the reported amounts of assets and liabilities in future financial reporting periods. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, such as forecasts of future events that are considered to be reasonable under the given circumstances.

Management also makes certain judgements, in addition to those involving estimates, when it applies its accounting policies. Judgements that have the most significant effect on the amounts recognized in the consolidated financial information and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities in future financial reporting periods are as follows:

Tax legislation. Russian tax, currency and customs legislation is subject to varying interpretations (see Note 40).

Deferred income tax asset recognition. The deferred tax asset represents income taxes recoverable through future deductions from taxable profits and is recorded in the consolidated statement of financial position. Deferred income tax assets are recorded to the extent that the application of the related tax benefit is probable. When determining future taxable profits and the amount of tax benefits available to certain Group entities, the management makes judgements and applies estimates based on recent taxable profits and expectations of future income that are believed to be reasonable under the circumstances.

Useful lives of property, plant and equipment. Property, plant and equipment items are stated net of accumulated depreciation. Estimating the useful life of a property, plant and equipment item is a matter of management judgement and is based on experience with similar assets. When determining the useful life of an asset, the management considers the expected usage, estimated technical obsolescence, residual value, physical wear and tear, and the environment in which the asset is operated. Differences between such estimates and actual results may result in losses in future periods, and changes in any of these conditions or estimates may result in adjustments to future depreciation rates.

F-125 18 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED)

Grants and subsidies. As a major investor in infrastructure and social projects in the regions where it operates, the Group has signed cooperation agreements with several regional authorities, including investment and financial support agreements, under which the Group is entitled to a partial refund of capital expenditures incurred in the respective regions subject to certain conditions. Such reimbursements are made after supporting documents have been submitted to the relevant authority either in the form of an income tax rebate or a direct grant of public funds. Quarterly, at each reporting date, management assesses whether there is a reasonable assurance that the Group is able to comply with the required conditions. The management believes that the Group will be able to comply with the conditions stipulated by the agreements.

Operating leases. The Group has a number of contracts with third parties for the rental of tank wagons (railway cars) with terms of 5-10 years each. At their inception minimum lease payments for some of the contracts were close to the market value of the wagons. At the same time this situation resulted from a shortage of rail cars on the market and the strong negotiating position of service providers. Based on that, and on the fact that the rewards are not substantially transferred to the Group because at the end of the lease period cars will be capable of generating significant cash flow (even if they are subsequently sold or rented at significant discounts), the rented cars are accounted as an operating lease in the consolidated financial statements.

The Group also has a number of arrangements with several shipping companies for freight of eight vessels with terms from 5 to 10 years. At the inception date, the minimum lease payments for contracts were up to 80-85 percent of the value of the vessels and the economic useful life amounted to approximately 30 years. Based on that, and on the fact that the rewards are not substantially transferred to the Group because at the end of the lease period vessels will be capable for generating significant cash flow, the rented vessels are presented as an operating lease in these consolidated financial statements.

Construction contracts. The Group accounts for construction projects, design and engineering projects using the ‘percentage-of-completion’ method. The use of this method requires the Group to estimate the proportional revenue and costs. If circumstances arise that may change the original estimates of revenues, costs, or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management. For the years ended 31 December 2017 and 31 December 2016, the Group recognized revenue from the application of the ‘percentage-of-completion method’ of RR 7,988 and RR 1,009, respectively (see Note 10). In addition, receivables related to construction contracts and certain other contracts accounted for under the ‘percentage-of-completion method’ are subject to credit risk. In other words, although some revenue continues to be contractually bound, the customer can still refuse to pay or to pay in time. Where revenue has been validly recognized on a contract, but an uncertainty subsequently arises about the recoverability of the related amount due from the customer, any provision against the amount due is recognized as an expense.

F-126 19 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED)

AO NIPIgazpererabotka consolidation. In June 2016, the Company sold a 44 percent ownership interest (representing 50 percent of the voting shares) in the Group’s subsidiary, AO NIPIgazpererabotka (“NIPIGAZ”) to certain companies controlled by some of its shareholders, including those that simultaneously serve as senior Group management. As a result, the effective percentage of NIPIGAZ’s share capital held by the Group decreased to 45 percent (representing 50 percent of the voting shares).

The Group has continued to consolidate NIPIGAZ as it has retained control over its relevant activities as defined by IFRS 10 “Consolidated Financial Statements”. The Group has made a significant judgement that it has retained control over NIPIGAZ as the Group and its key management can cumulatively control a majority of votes at the meetings of NIPIGAZ’s governing bodies. Also, the Group holding 50 percent of the voting shares can block any decisions by NIPIGAZ’s governing bodies.

The difference between the amount of non-controlling interest, calculated as 44 percent of NIPIGAZ’s net assets, and the fair value of the consideration received for the shares sold was recognized in equity attributable to the shareholders of the parent company, in the amount of RR 128 for the year ended 31 December 2016.

OOO SIBUR-Portenergo disposal. In November 2015, the Company sold its 100% interest in OOO SIBUR-Portenergo, the subsidiary of the Group that operates the liquefied petroleum gas and naphtha transshipment terminal located in Ust-Luga, Leningrad Region (“Terminal”), to Baltic Sea Transshipment PTE. Ltd (“Buyer”), a company established by a consortium of Russian and international investors, including the Russian Direct Investment Fund (see Note 4).

After the disposal, OOO Management company SIBUR-Portenergo (“Management Company”), a subsidiary of the Group, manages Terminal operations for a service fee. The Buyer is entitled to terminate the service contract with the Management Company at any time.

In November 2015, the Company signed a long-term, take-or-pay transshipment contract with OOO SIBUR-Portenergo, which is valid through December 2029 (“Transshipment Contract”). Under the Transshipment Contract, the Company must transship its liquefied petroleum gas (“LPG”) and fully utilize the Terminal’s LPG transshipment capacity. As well, the Company must transship its naphtha and utilize a pre-determined percentage of the Terminal’s naphtha transshipment capacity if there are no other customers.

The Company’s management took the requirements of IFRS 10 “Consolidated Financial Statements” into consideration and made a significant judgement that, although the Group has retained some exposure or rights to variable returns from its involvement with the Terminal, it does not control the Terminal because it is the Buyer’s prerogative to make decisions on relevant Terminal operations, and the Terminal’s naphtha transshipment capacity may be utilized by third parties upon a decision of the Buyer.

Cash and cash equivalents. In 2015, cash received by the Group’s subsidiary OOO ZapSibNeftekhim from Russia’s National Wealth Fund, was placed on a special account at Sberbank of Russia (see Note 26). This cash can only be used for payments for equipment delivered and services provided to the project ZapSibNeftekhim (see Note 13). The Group’s management made a judgement that, while this cash is limited to the aforementioned use, it can be classified as cash and cash equivalents as OOO ZapSibNeftekhim has no other significant expenditures. As of 31 December 2017, the outstanding balance of cash held on this special account was RR nil (as of 31 December 2016 – RR 37,397).

F-127 20 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

4 ACQUISITION AND DECONSOLIDATION OF SUBSIDIARIES AND TRANSACTIONS WITH NON-CONTROLLING INTEREST

AO Uralorgsintez

As of 31 December 2016, the Company classified assets and liabilities of its subsidiary, AO Uralorgsintez, in the amount of RR 2,641 and RR 600, respectively, as assets held for sale and associated liabilities. The main operating activities of AO Uralorgsintez are processing hydrocarbon feedstock to LPG and naphtha, and producing benzene hydrocarbons and methyl tertiary butyl ether (“MTBE”), a high-octane fuel additive.

In April 2017, the Company sold its 100% interest in AO Uralorgsintez to OAO ECTOSintez (“the Buyer”), a Russian producer of anti-knock compounds, mainly MTBE, for a cash consideration of RR 22,000 and a working capital price adjustment of RR 175, both received in the first half 2017.

The interest was disposed under condition that the Company and the Buyer would sign several operating agreements, including those, under which the Buyer is obliged to: 1) process certain types of the Group's feedstock into finished goods using significant part (up to full capacity) of relevant AO Uralorgsintez's production facilities; 2) purchase certain raw materials from the Group to utilise significant part of some AO Uralorgsintez's production capacities with the option of the Group to utilise the residual part of these production capacities; 3) sell significant part of AO Uralorgsintez's major product when the Group acts as a sales agent. All these contracts were signed at the transaction date for the 10-years period at fair market prices.

The Company’s management considered the requirements of IFRIC 4 “Determining Whether an Arrangement Contains a Lease”. The terms of the contracts are at arm’s length. Not only more than an insignificant amount of AO Uralorgsintez’s output will be consumed by parties other than the Group, while the Buyer makes decisions on relevant operations of AO Uralorgsintez and controls physical access to the production site. As a result, the management made a significant judgement that it is not a lease arrangement, even though the Group will utilise a significant part of the AO Uralorgsintez’s production capacity.

The carrying amounts of AO Uralorgsintez’s assets and liabilities as of the disposal date amounted to RR 2,909 and RR 539, respectively. As of 31 December 2016, AO Uralorgsintez’s assets and liabilities amounted to RR 2,641 and RR 600, respectively. AO Uralorgsintez's assets were mainly presented by property, plant and equipment; liabilities were presented by trade payables, deferred tax liabilities and other payables.

As a result of the disposal, the Company recognized a gain in the amount of RR 19,805, which was classified as a gain on disposal of subsidiary in the consolidated statement of profit or loss.

The Company did not incur any significant transaction costs on this disposal. Until the disposal date AO Uralorgsintez’s financial results are reported in the Plastics, Elastomers and Intermediates segment (see Note 9).

OOO Tobolsk HPP

In February 2016, the Company acquired a 100 percent stake in OOO Tobolsk Heating and Power Plant (Tobolsk HPP) from a third party, OAO Fortum (the “Seller”), for the purposes of further development of the Tobolsk production site.

The Company purchased Tobolsk HPP for a cash consideration of RR 1,200 and a working capital price adjustment of RR 254, both of which were paid in 2016. Additionally, the Company should reimburse the Seller for all Tobolsk HPP cash inflows under its capacity supply contracts, which are specific to this industry revenue stream, guaranteed by the legislation of the Russian Federation, as the recovery of capital investments. Such reimbursements are payable on a monthly basis from the date of acquisition until 2020. In addition, there is a contingent consideration payable after 1 April 2018 if the Group realises synergies as a result of integrating Tobolsk HPP into its production site infrastructure in Tobolsk.

F-128 21 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

4 ACQUISITION AND DECONSOLIDATION OF SUBSIDIARIES AND TRANSACTIONS WITH NON-CONTROLLING INTEREST (CONTINUED)

As at the transaction date, a reimbursement amount of RR 5,870 was calculated based on the estimated future cash flows under the relevant capacity supply contracts discounted by the Group’s weighted average cost of capital. In 2017 and 2016, the Company reimbursed the Seller RR 2,108 and RR 1,192, respectively.

As of 31 December 2017 and 31 December 2016, the Company reassessed the present value of future cash flows under the relevant capacity supply contracts, considering market inputs, relevant at the reporting date and changes in electricity supply legislation, adopted subsequently to the acquisition date. For the years ended 31 December 2017 and 31 December 2016, the Company recognized gain of RR 80 and loss of RR 690, respectively, in the result of subsidiary’s acquisition and remeasurement of related liabilities line of the consolidated statement of profit or loss.

As of 31 December 2017 and 31 December 2016, a corresponding liability was recognized in the amount of RR 4,737 and RR 6,117, respectively. As of 31 December 2017 and 31 December 2016, the non-current portion of this liability in the amount of RR 2,856 and RR 4,132, respectively, was recognized in the other non-current liability line, while the current portion in the amount of RR 1,881 and RR 1,985, respectively, was recognized in the trade and other payables line of the consolidated statement of financial position. In 2017 and 2016, unwinding of discount on the liability in the amount of RR 808 and RR 749, respectively, was recognized in the finance expenses line of the consolidated statement of profit or loss.

As at the transaction date, a liability related to contingent consideration of RR 585 was calculated as the sum of the potential outcomes of different scenarios in which the Group realizes synergies from integrating Tobolsk HPP into its production site infrastructure in Tobolsk, multiplied by the probability of each scenario. In 2017, the Company reassessed the probability of each scenario, and as a result, recognized loss of RR 1,045 in the result of subsidiary’s acquisition and remeasurement of related liabilities line of the consolidated statement of profit or loss. As of 31 December 2017 and 31 December 2016, a corresponding liability was recognized in the amount of RR 1,818 and RR 666, respectively, in the other non-current liabilities line of the consolidated statement of financial position (see Note 39).

The Company recognized an excess amount totalling RR 2,356 of net assets acquired over the total purchase consideration in a result of subsidiary’s acquisition and remeasurement of related liabilities line of the consolidated statement of profit or loss for the year ended 31 December 2016.

The net result of the acquisition recognized by the Company in a result of subsidiary’s acquisition and remeasurement of related liabilities line of the consolidated statement of profit or loss for the years ended 31 December 2017 and 31 December 2016 consists of:

2017 2016 An excess amount of net assets acquired over the total purchase consideration - 2,356 Remeasurement of payables for acquisition of Tobolsk HPP (965) (690) Result of subsidiary’s acquisition and remeasurement of related liabilities (965) 1,666

OOO SIBUR-Portenergo

In November 2015, the Company’s interest in OOO SIBUR-Portenergo was sold for a cash consideration of RR 21,335, which was received at the disposal date, as well as deferred and contingent considerations. The deferred consideration was received in full after confirmation of the terminal’s basic capacity in the amount of RR 3,445 in July 2016.

The contingent consideration amount of USD 18 million is payable after seven years since the disposal date and was derived based on a specific formula linked to the pricing of OOO SIBUR-Portenergo’s long-term transshipment contracts in excess of a defined threshold.

As of 31 December 2017 and 31 December 2016, the contingent consideration was RR 736 and RR 719, respectively (see Note 39).

F-129 22 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

4 ACQUISITION AND DECONSOLIDATION OF SUBSIDIARIES AND TRANSACTIONS WITH NON-CONTROLLING INTEREST (CONTINUED)

AO Polief

In December 2015, following the results of a privatisation auction, the Company signed an agreement to acquire a 17.5 percent non-controlling interest in AO Polief from the Government of the Republic of Bashkortostan for a cash consideration of RR 500. The transaction was finalised in January 2016; as a result, the Company, previously held an 82.5 percent stake in the entity, became the sole owner of AO Polief. The difference between the consideration paid and the non-controlling interest acquired was recognized in retained earnings in the amount of RR 193.

5 ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE

As of 31 December 2017, the assets and liabilities associated with the assets classified as held for sale represented by assets and liabilities of the Group’s subsidiary OOO LNG NOVAENGINEERING (“NOVAENGINEERING”), which was founded by NIPIGAZ in February 2017 to provide engineering, design and other services related to gravity-based structure liquefied natural gas plants (“Projects”), including ARCTIC LNG 2 project for PAO NOVATEK.

In the second half of 2017, NIPIGAZ signed the joint venture agreement (“JVA”) with Technip France and LINDE AG. In accordance with the JVA the parties will exercise joint control over relevant activities of NOVAENGINEERING and the Group’s management determines it as a joint venture. In January 2018 the part of NIPIGAZ’s interest in NOVAENGINEERING was sold for a cash consideration of RR 16 to the parties of the JVA. As a result the JVA came into force and the ownership percentage of NIPIGAZ in NOVAENGINEERING decreased to 50.1 percent. According to the JVA terms profit sharing percentage of the Group in NOVAENGINEERING’s results is not the same as ownership percentage and is specifically determined for each Project. The Group’s management is planning to keep the Group’s majority ownership percentage in NOVAENGINEERING.

As of 31 December 2017, the assets and liabilities associated with the assets classified as held for sale amounted to RR 6,568, mainly presented by trade and other receivables, and RR 6,696, mainly presented by trade and other payables, respectively.

NOVAENGINEERING’s financial results are reported as Unallocated in the segment information (see Note 9).

F-130 23 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

6 REVENUE

Revenue by products and reportable segments is presented below:

Year ended 31 December 2017 2016 Feedstock and Energy 184,199 170,708 Liquefied petroleum gas 110,708 88,839 Natural gas 47,474 45,958 Naphtha 23,904 30,846 Raw natural gas liquids 67 2,701 Other sales 2,046 2,364 Olefins and Polyolefins 88,135 86,830 Polyolefins 63,576 60,225 BOPP films 16,642 18,509 Olefins 5,810 5,072 Other polymers products 1,418 2,344 Other sales 689 680 Plastics, Elastomers and Intermediates 146,877 130,690 Elastomers 51,857 39,421 Plastics and organic synthesis products 47,227 45,929 Intermediates and other chemicals 23,410 20,539 MTBE and fuel additives 23,120 23,213 Other sales 1,263 1,588 Unallocated 35,408 23,584 Other revenue 35,408 23,584 Total revenue 454,619 411,812

7 OPERATING EXPENSES Year ended 31 December 2017 2016 Feedstock and materials 92,934 82,993 Transportation and logistics 67,058 73,738 Energy and utilities 38,770 37,716 Staff costs 38,334 34,510 Depreciation and amortisation 35,486 34,996 Goods for resale 23,170 14,182 Services provided by third parties 14,129 10,594 Repairs and maintenance 8,291 8,534 Processing services of third parties 3,333 2,040 Taxes other than income tax 3,313 2,246 Rent expenses 1,354 1,256 Marketing and advertising 1,221 777 Charity and sponsorship 820 950 Loss on disposal of property, plant and equipment 319 172 Impairment of assets held for sale 180 - Impairment of property, plant and equipment 164 1,502 Change in WIP and refined products balances (1,803) (284) Other 2,525 2,759 Total operating expenses 329,598 308,681

Staff costs for the years ended 31 December 2017 and 31 December 2016 included statutory pension and other social security contributions of RR 7,127 and RR 6,563, respectively, also RR 592 and RR 472 of statutory pension and other social security contributions were capitalized in property, plant and equipment for the years ended 31 December 2017 and 31 December 2016, respectively.

F-131 24 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

8 FINANCE INCOME AND EXPENSES

Year ended 31 December 2017 2016 Foreign exchange gain from financing activities 11,150 51,740 Interest income 2,012 1,013 Gain on the loan release (Note 23) 1,384 - Unwinding of discount on loans receivable and non-current accounts receivable 142 247 Discount on loans and borrowings 93 - Gain on derivative financial instruments (Note 39) - 104 Other income 176 92 Total finance income 14,957 53,196 Interest expense (6,416) (13,880) Foreign exchange loss from non-financing activities (2,107) (2,816) Unwinding of discount on non-current accounts payable (1,178) (1,094) Bank commissions (783) (3,619) Interest expense on post-employment obligations (191) (209) Other expense (299) (294) Total finance expenses (10,974) (21,912)

9 SEGMENT INFORMATION

The Group operates as a vertically integrated business, gathering and processing hydrocarbon feedstock, obtained from major Russian oil and gas companies, and producing and selling energy products as well as a wide range of petrochemical products.

The Group’s chief operational decision-makers are the Chairman of the Management Board, the Chief Operating Officer, the Chief Financial Officer and three Executive Directors. These executives regularly review the Group’s internal reporting in order to assess performance and allocate resources.

The Group’s management determines three operating and reportable segments:

 Feedstock and Energy – processing of associated petroleum gas and raw natural gas liquids to produce energy products, including natural gas, liquefied petroleum gases and naphtha, which are marketed and sold externally and are also used as feedstock by the Olefins and Polyolefins segment and the Plastics, Elastomers and Intermediates segment;  Olefins and Polyolefins – mainly the production of polypropylene, polyethylene, propylene, ethylene and BOPP films;  Plastics, Elastomers and Intermediates – the production of synthetic rubbers, plastics, organic synthesis products and other petrochemical products. In addition, the Plastics, Elastomers and Intermediates segment produces fuel additives, including MTBE, 100 percent of which is sold externally.

The Group’s management assesses the performance of each operating segment based on their respective EBITDA contributions. The revenues and expenses of some of the Group’s subsidiaries, which primarily provide energy supply, transportation, processing, managerial and other services to other Group entities are not allocated into the operating segments.

EBITDA is calculated as the profit or loss for the period, adjusted by income tax expense, finance income and expenses, share of net income or loss of joint ventures and associates, depreciation and amortization, impairment of property, plant and equipment, profit or loss on disposal of investments, as well as other one-off items.

To reflect and assess the results of the joint ventures that launched their operations in 2014 – 2015 the Group’s EBITDA was adjusted by the Group’s portion of the EBITDA (calculated in accordance with the methodology as above) of joint ventures and associates (Adjusted EBITDA).

F-132 25 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

9 SEGMENT INFORMATION (CONTINUED)

Inter-segment transfers include transfers of raw materials, goods and services from one segment to another, amount is determined based on market prices for similar goods.

Other information provided to management, except as noted below, is measured in a manner consistent with that in these consolidated financial statements.

Feedstock Olefins Plastics, Total and and Poly- Elastomers and reportable Energy olefins Intermediates segments Unallocated Total Year ended 31 December

2017 Total segment revenue 229,014 112,910 149,277 491,201 37,169 528,370 Inter-segment transfers (44,815) (24,775) (2,400) (71,990) (1,761) (73,751) External revenue 184,199 88,135 146,877 419,211 35,408 454,619 EBITDA 89,351 44,636 30,358 164,345 (3,494) 160,851 Group’s portion of joint ventures and associates EBITDA 743 7,154 - 7,897 - 7,897 Adjusted EBITDA 90,094 51,790 30,358 172,242 (3,494) 168,748 Year ended 31 December

2016 Total segment revenue 196,025 107,426 132,379 435,830 26,159 461,989 Inter-segment transfers (25,317) (20,596) (1,689) (47,602) (2,575) (50,177) External revenue 170,708 86,830 130,690 388,228 23,584 411,812 EBITDA 60,526 48,909 31,508 140,943 (1,314) 139,629 Group’s portion of joint ventures and associates EBITDA 685 8,843 - 9,528 - 9,528 Adjusted EBITDA 61,211 57,752 31,508 150,471 (1,314) 149,157

For the years ended 31 December 2017 and 2016, EBITDA in US dollars measured at the weighted average exchange rate of the US dollar against the Russian rouble (see Note 2) was USD 2,757 million and USD 2,083 million, respectively.

A reconciliation of EBITDA to profit before income tax was as follows:

Year ended 31 December 2017 2016 EBITDA 160,851 139,629 Finance income 14,957 53,196 Finance expenses (10,974) (21,912) Result of subsidiary’s acquisition and remeasurement of related liabilities (965) 1,666 Gain on disposal of subsidiary 19,805 - Share of net income of joint ventures and associates 2,073 6,471 Depreciation and amortisation (35,486) (34,996) Impairment of property, plant and equipment (164) (1,502) Impairment of assets held for sale (180) - Profit before income tax 149,917 142,552

Geographical information. All of the Group’s production facilities are located in the Russian Federation.

F-133 26 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

9 SEGMENT INFORMATION (CONTINUED)

The breakdown of revenues by geographical regions is as follows: Year ended 31 December 2017 2016 Russia 262,862 237,843 Europe 135,989 117,680 Asia 29,193 28,146 CIS 23,888 22,462 Other 2,687 5,681 Total revenue 454,619 411,812

10 CONSTRUCTION CONTRACTS

The construction contracts revenue is recognized in accordance with IAS 11 “Construction Contracts” by reference to the stage of completion of the contract activity at the end of the reporting period within other revenue in the consolidated statement of profit or loss. The stage of completion of a contract was determined based on the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.

During 2017 and 2016, the following figures relate to the Group’s activities under construction contracts:

31 December 2017 31 December 2016 Construction contracts revenue 7,988 1,009 Contract cost expensed (6,773) (713) Gross margin 1,215 296

The Group’s financial position with respect to construction contracts in progress was as follows:

31 December 2017 31 December 2016 Aggregate amount of contract costs incurred 7,486 713 Aggregate amount of recognized profits 1,511 296 Less: Progress billings (9,842) (1,009) Gross amount due to customers for contract work (845) -

The gross amount due to customers for contract work is recognized within short-term advances received under project management services in the consolidated statement of financial position. As of 31 December 2017 and 2016, the amount of advances from customers, related to construction contracts, was RR 7,439 and RR 3,997, respectively.

11 EARNINGS PER SHARE

The basic and diluted earnings per share ratio has been calculated by dividing the profit for the reporting year attributable to equity holders of the parent company by the weighted average number of shares outstanding during the year, excluding treasury shares. The weighted average number of ordinary shares outstanding for the years ended 31 December 2017 and 2016 was 2,178,479,100.

F-134 27 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

12 PROPERTY, PLANT AND EQUIPMENT

Movements in the net book value of property, plant and equipment were as follows:

Machinery and Assets under Buildings Facilities equipment Transport construction Other Total Net book value as of 31 December 2015 37,701 143,287 97,996 7,397 63,349 9,797 359,527 Depreciation charge (1,998) (9,955) (15,005) (713) - (1,861) (29,532) Additions - - - - 105,128 386 105,514 Acquisition of subsidiary* 2,563 1,231 2,715 16 19 2 6,546 Transfers 8,077 11,159 16,755 151 (36,664) 522 - Reclassification to inventories - - - - - (1,525) (1,525) Impairment (269) (877) (44) - (262) - (1,452) Disposals (75) (425) (275) (126) (456) (317) (1,674) Reclassification to assets held for sale (Note 4) (399) (355) (1,290) (76) (260) (22) (2,402) Historical cost as of 31 December 2016 56,904 184,450 163,706 11,283 130,854 9,959 557,156 Accumulated depreciation (11,304) (40,385) (62,854) (4,634) - (2,977) (122,154) Net book value as of 31 December 2016 45,600 144,065 100,852 6,649 130,854 6,982 435,002 Depreciation charge (2,351) (10,532) (15,371) (600) - (1,816) (30,670) Additions - - - - 201,749 2,300 204,049 Transfers 9,583 7,633 9,510 47 (27,182) 409 - Reclassification to inventories - - - - - (1,260) (1,260) Reversal of impairment/(impairment) 38 14 102 - (333) 15 (164) Disposals (857) (68) (73) (48) (410) (186) (1,642) Historical cost as of 31 December 2017 65,383 191,997 172,155 11,134 304,678 11,051 756,398 Accumulated depreciation (13,370) (50,885) (77,135) (5,086) - (4,607) (151,083) Net book value as of 31 December 2017 52,013 141,112 95,020 6,048 304,678 6,444 605,315

*acquisition of Tobolsk HPP

Transfers for the year ended 31 December 2017 related to the following main items of property, plant and equipment, construction of which had been finalized: reconstruction of gas processing facilities at Yuzhno-Balyksky GPZ and modernization of steam supply system at OOO SIBUR-Kstovo.

For 2017 and 2016, the Group capitalized borrowing costs of RR 14,109 and RR 9,600, respectively. Borrowing costs included foreign exchange losses from financing activities in the amount of RR 4,632 and RR 118 for the year ended 31 December 2017 and 31 December 2016, respectively. The capitalization rates, excluding the effect of capitalized foreign exchange losses from financing activities, were 6.60 percent and 7.25 percent, respectively.

13 ADVANCES AND PREPAYMENTS FOR CAPITAL CONSTRUCTION

Advances and prepayments in the amount of RR 69,015 and RR 95,998 as of 31 December 2017 and 2016, respectively, primarily were paid to suppliers and contractors under the major investment project of the Group – the project ZapSibNeftekhim (“ZapSib”), construction of the ethylene cracking unit and polymers production units located in Tobolsk, Tyumen Region. The mechanical completion is to be attained by the end of 2019.

F-135 28 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

13 ADVANCES AND PREPAYMENTS FOR CAPITAL CONSTRUCTION (CONTINUED)

As of 31 December 2016, the most significant advances and prepayments were paid to Linde AG Engineering Division, Renaissance Heavy Industries, Technip France, Yamata Endüstriyel Projeler Inşaat Taahhüt ve Ticaret, ThyssenKrupp Industrial Solutions AG.

The Group invests in relationships with domestic construction services contractors, sharing expertise with strategic partners. The Group’s experts support the management team of one of its domestic contractor engaged in construction of ZapSib, being participants of its Board of Directors. This contractor is not a related party for the Group, considering the consulting role of the Group’s representatives in the contractor’s governing body.

14 GOODWILL AND INTANGIBLE ASSETS

The net book value of intangible assets was as follows:

Customer Supply Software and Development Goodwill relationships contracts licences costs Total Net book value as of 31 December 2015 11,959 414 104,547 9,507 946 127,373 Acquisition of subsidiary* - - 4,115 - - 4,115 Additions - - - 3,006 909 3,915 Disposals - - - - (201) (201) Impairment - - - - (50) (50) Amortisation charge - (71) (6,947) (1,942) - (8,960) Reclassification from/(to) assets held for sale 138 - - (5) - 133 Historical cost as of 31 December 2016 12,097 680 119,931 15,038 1,604 149,350 Accumulated amortisation - (337) (18,216) (4,472) - (23,025) Net book value as of 31 December 2016 12,097 343 101,715 10,566 1,604 126,325 Additions - - - 2,941 467 3,408 Disposals - - - (21) (97) (118) Amortisation charge - (71) (7,023) (2,602) - (9,696) Historical cost as of 31 December 2017 12,097 680 119,931 17,896 1,974 152,578 Accumulated amortisation - (408) (25,239) (7,012) - (32,659) Net book value as of 31 December 2017 12,097 272 94,692 10,884 1,974 119,919

*acquisition of Tobolsk HPP

Intangible assets other than goodwill are presented in a separate line in the consolidated statement of financial position.

F-136 29 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

14 GOODWILL AND INTANGIBLE ASSETS (CONTINUED)

Impairment tests for goodwill

Goodwill related to the acquisitions of SIBUR International GmbH, OOO Biaxplen and OOO Yugragazpererabotka is allocated to the Group’s cash-generating units (“CGUs”), which are the same as operating and reportable segments (see Note 9).

An operating segment-level summary of the goodwill allocation is presented below:

31 December 2017 31 December 2016 SIBUR International GmbH Feedstock and Energy 3,189 3,189 Olefins and Polyolefins 1,160 1,160 Plastics, Elastomers and Intermediates 2,348 2,348

OOO Biaxplen Olefins and Polyolefins 2,783 2,783

OOO Yugragazpererabotka Feedstock and Energy 2,479 2,479

OOO IT-Service Unallocated 138 138 Total goodwill 12,097 12,097

The recoverable amount for each CGU is the higher of its fair value, less the selling cost and its value- in-use calculations, and has been determined based on a value-in-use calculation. These calculations use pre-tax cash flow projections based on management’s five-year financial forecast prepared as of the year end. Cash flows beyond the five-year period are extrapolated using an estimated growth rate of three percent. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. The following key assumptions are used in the value-in-use calculation: a discount rate of 17.87 percent, an exchange rate of RR 62-64 to USD 1, an oil price of USD 49-55 per bbl, and a Consumer Price Index of 3.9-4.2 percent. The discount rates used are pre-tax and reflect specific risks relating to the CGU’s operating activity.

As the result of the management assessment no impairment of goodwill was identified.

15 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

31 December 2017 31 December 2016 OOO RusVinyl 19,305 19,058 OOO Yuzhno-Priobsky GPZ 6,121 6,096 Reliance Sibur Elastomers Private Limited 3,400 1,317 OOO NPP Neftekhimia 2,583 3,225 AO Sibgazpolimer 2,263 2,060 OOO SNHK 1 1 Total investments in joint ventures and associates 33,673 31,757

F-137 30 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

15 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (CONTINUED)

The table below summarises the movements in the carrying amount of the Group’s investment in associates and joint ventures.

2017 2016 Joint Joint

Ventures Associates Ventures Associates Investments in joint ventures and associates as of the beginning of the year 30,440 1,317 25,905 1,159 Share of profit/(loss) of joint ventures and associates 2,080 (7) 6,461 10 Additions - 2,075 614 437 Dividends received from joint ventures and associates (2,247) - (2,540) - Translation differences - 15 - (289) Investments in joint ventures and associates as of the end of the year 30,273 3,400 30,440 1,317

The Group reviews its investments in joint ventures and associates for potential impairment indicators on a regular basis. As of 31 December 2017 there were no circumstances that would indicate the carrying value of investments in joint ventures and associates exceeds its recoverable amount.

The nature of the Group’s relationship with and the financial information of each individually material associate and joint venture are described below.

OOO RusVinyl. In June 2007, the Group formed a joint venture, OOO RusVinyl, with SolVin Holding Nederland B.V. (which is ultimately controlled by Solvay SA) for the construction of a polyvinyl chloride production complex in the Nizhny Novgorod Region. In September 2014, OOO RusVinyl began its operation.

In 2011, the Group issued a finance guarantee for 50 percent of loans obtained by OOO RusVinyl and pledged its share in the joint venture as security for the financial obligations of OOO RusVinyl. In December 2016, the coverage of the Group guarantee was decreased to 20 percentage of loans of OOO RusVinyl and in addition to that the Group issued EUR 32.5 million guarantee as a liquidity support undertaking.

As of 31 December 2017 and 31 December 2016, the maximum credit risk exposures due to financial guarantees issued for the OOO RusVinyl were RR 8,093 and RR 8,580, respectively.

In 2017, the Group issued loan to OOO RusVinyl (see Note 21) maturing in 2024 to finance its operating activity. The Group provided loan on an arm’s length basis and its ownership share remained unchanged.

F-138 31 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

15 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (CONTINUED)

The table below provides information on the statement of financial position and the results of OOO RusVinyl as of and for the years ended 31 December 2017 and 2016.

31 December 2017 31 December 2016 Assets Non-current assets Property, plant and equipment 64,952 67,898 Other non-current assets 2,429 2,636 Total non-current assets 67,381 70,534 Current assets Cash and cash equivalents 1,807 1,471 Other current assets 4,407 3,951 Total current assets 6,214 5,422 Total assets 73,595 75,956

Liabilities Non-current liabilities Financial liabilities 27,297 29,307 Total non-current liabilities 27,297 29,307 Current liabilities Financial liabilities 5,291 5,454 Other current liabilities 2,397 3,078 Total current liabilities 7,688 8,532 Total liabilities 34,985 37,839 Net assets 38,610 38,117

Reconciliation to carrying amounts:

Year ended 31 December 2017 2016 Opening net assets 38,117 31,180 Profit for the period 493 6,937 Closing net assets 38,610 38,117 Group's share in percent 50 50 Group's share 19,305 19,058 Carrying amount 19,305 19,058

Year ended 31 December 2017 2016 Revenue 22,578 22,621 Depreciation and amortisation (3,433) (3,423) Interest income 22 54 Interest expense (2,787) (3,183) Other finance expense (66) (88) Foreign exchange (loss)/gain (1,712) 6,101 Income tax expense (185) (1,800) Profit for the period 493 6,937

OOO Yuzhno-Priobsky GPZ. In 2007, the Group and the Gazprom Neft Group established a joint venture in the Khanty-Mansiysk Autonomous District to construct a gas processing plant based on Yuzhno-Priobskaya compressor station. On 3 September 2015, OOO Yuzhno-Priobsky GPZ began its operation.

F-139 32 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

15 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (CONTINUED)

In September 2014 and February 2015, the Gazprom Neft Group made additional contributions to the joint venture’s share capital of RR 4,810 and RR 1,240, respectively, thus the Group’s nominal ownership in the joint venture has temporarily decreased to 26 percent. According to the shareholders’ agreement, both shareholders are obligated to finance the joint venture on a parity basis. As a result, the Group recognized a liability for contributions to the share capital of OOO Yuzhno-Priobsky GPZ in the amount of RR 3,025 with a corresponding increase in the investments in joint ventures and associates line.

The Group paid to the Gazprom Neft Group RR 2,053 in 2014 and RR 972 during the first half of 2015 in cash, which were recognized as loans receivable. In April 2016, these loans were settled by Gazprom Neft Group and the Group has settled its liability for additional contribution to the share capital of OOO Yuzhno-Priobsky GPZ in the amount of RR 3,025. As a result, the Group’s stake in the joint venture has increased to 50 percent upon the transfer of the related portion of shares previously owned by the Gazprom Neft Group.

In September 2016, the Group and the Gazprom Neft Group each made additional contribution to the joint venture’s share capital in the amount of RR 614; the Group’s ownership share remained unchanged.

In 2017, the Group received dividends from OOO Yuzhno-Priobsky GPZ of RR 26.

The table below provides information on the statement of financial position and the results of OOO Yuzhno-Priobsky GPZ as of and for the years ended 31 December 2017 and 2016.

31 December 2017 31 December 2016 Assets Non-current assets Property, plant and equipment 8,655 9,802 Other non-current assets 298 258 Total non-current assets 8,953 10,060 Current assets Cash and cash equivalents 1 9 Other current assets 4,103 2,906 Total current assets 4,104 2,915 Total assets 13,057 12,975

Liabilities Non-current liabilities Other non-current liabilities 365 319 Total non-current liabilities 365 319 Current liabilities Other current liabilities 450 464 Total current liabilities 450 464 Total liabilities 815 783 Net assets 12,242 12,192

F-140 33 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

15 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (CONTINUED)

Reconciliation to carrying amounts:

Year ended 31 December 2017 2016 Opening net assets 12,192 10,856 Profit for the period 101 108 Additional contribution to the share capital - 1,228 Dividends paid (51) - Closing net assets 12,242 12,192 Group's share in percent 50 50 Group's share 6,121 6,096 Carrying amount 6,121 6,096

Year ended 31 December 2017 2016 Revenue 2,004 2,160 Depreciation and amortisation (1,363) (1,255) Interest income - 20 Foreign exchange gain 1 - Income tax expense (23) (28) Profit for the period 101 108

OOO NPP Neftekhimia. In September 2010, the Group established a joint venture, OOO NPP Neftekhimia, with OAO Moskovskiy NPZ (later renamed as AO Gazpromneft-MNPZ), a member of Gazprom neft Group. The joint venture is a polypropylene producer located in Moscow, and the Group purchases substantially all of its production volumes.

In 2017 and 2016, the Group received dividends from OOO NPP Neftekhimia of RR 1,429 and RR 2,540, respectively.

The table below provides information on the statement of financial position and the results of OOO NPP Neftekhimia as of and for the years ended 31 December 2017 and 2016.

31 December 2017 31 December 2016 Assets Non-current assets Property, plant and equipment 1,495 1,531 Other non-current assets 68 96 Total non-current assets 1,563 1,627 Current assets Cash and cash equivalents 310 321 Other current assets 926 2,892 Total current assets 1,236 3,213 Total assets 2,799 4,840

Liabilities Non-current liabilities Other non-current liabilities 27 21 Total non-current liabilities 27 21 Current liabilities Other current liabilities 513 1,052 Total current liabilities 513 1,052 Total liabilities 540 1,073 Net assets 2,259 3,767

F-141 34 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

15 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (CONTINUED)

Reconciliation to carrying amounts:

Year ended 31 December 2017 2016 Opening net assets 3,767 5,498 Profit for the period 1,350 3,349 Dividends paid (2,858) (5,080) Closing net assets 2,259 3,767 Group’s share in percent 50 50 Group’s share 1,130 1,883 Unrealised gain (119) (230) Goodwill 1,572 1,572 Carrying amount 2,583 3,225

Year ended 31 December 2017 2016 Revenue 6,451 8,186 Depreciation and amortisation (278) (264) Interest income 87 303 Foreign exchange (loss)/gain (4) 6 Income tax expense (403) (912) Profit for the period 1,350 3,349

Reliance Sibur Elastomers Private Limited. In February 2012, the Group and the Reliance Industries Limited established a company for the construction of butyl rubber production facility at Reliance Industries Limited’s integrated petrochemical site in Jamnagar, India. In 2017 and 2016, the Group made additional contributions to the associate’s share capital of RR 2,075 and RR 437, respectively; the Group’s ownership share remained unchanged.

AO Sibgazpolimer. In May 2014, AO Sibgazpolimer acquired a 50 percentage stake in OOO Poliom from AO GK Titan for a cash consideration of RR 2,297 and a contingent consideration of RR 2,131. Purchase price allocation resulted in recognition of goodwill in the amount of RR 5,960, which is included in carrying value of investment in OOO Poliom.

In 2017, the Group received dividends from AO Sibgazpolimer of RR 792.

Summarised financial information of these individually immaterial joint venture and associate is provided below.

As of and for the year ended 31 December 2017

Non- Non- Oper. Current current Current current Reve- profit/ Рrofit/ assets assets liabilities liabilities nues (loss) (loss) Reliance Sibur Elastomers Private Limited 5,620 17,665 2,036 7,256 - (1) (22) AO Sibgazpolimer 3 6,795 - 2,272 2,212 2,212 1,990

As of and for the year ended 31 December 2016

Non- Non- Oper. Current current Current current Reve- profit/ assets assets liabilities liabilities nues (loss) Profit Reliance Sibur Elastomers Private Limited 1,195 10,036 4,047 1,518 55 53 38 AO Sibgazpolimer 12 6,167 2,059 - 3,040 3,039 2,990

F-142 35 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

15 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (CONTINUED)

The Group has a number of long-term contracts with joint ventures, including contracts for procurement of processing services and purchase of finished goods. Balances outstanding as of 31 December 2017 and 31 December 2016 and transactions for the years ended 31 December 2017 and 31 December 2016 with joint ventures and associates are disclosed in Note 37.

The Group will finance investments in its joint ventures and associates should these entities be unable to attract third parties’ financing. The Group’s commitments under these investment arrangements comprised RR 819 and RR 2,121 as of 31 December 2017 and 2016, respectively.

The table below summarizes information about the Group’s investments in joint ventures and associates.

Interest held (percent) as of Country of incorporation and principal 31 December 31 December businessplace of business Nature of operations 2017 2016 Joint Venture: OOO RusVinyl Russia Polyvinyl chloride production 50 50 OOO Yuzhno-Priobsky Associated petroleum gas GPZ Russia processing 50 50 OOO NPP Neftekhimia Russia Polypropylene production 50 50 Investments in Omsk polypropylene plant, OOO AO Sibgazpolimer* Russia “Poliom” (50 percent stake) 50 50 Production of plastics and OOO SNHK Russia synthetic resins 50 50 Associate: Reliance Sibur Elastomers Butyl rubber production Private Limited India (investment project) 25 25 * Special purpose vehicle established for investing in production entities.

The voting and ownership percentage in joint ventures and associates are the same.

16 ADVANCES ISSUED AND RECEIVED UNDER PROJECT MANAGEMENT SERVICES

In July 2015, OOO Gazprom Pererabotka Blagoveshchensk, a Gazprom Group’s subsidiary, and AO NIPIgazpererabotka, a Group’s subsidiary, signed a contract for managing a project of construction of the Amur Gas Processing Plant (Amur GPP), located near the town of Svobodny, Amur Region. Under this agreement, NIPIGAZ manages and supervises engineering work, the equipment and materials procurement and delivery to site and construction work until the transfer of the plant to OOO Gazprom Pererabotka Blagoveshchensk in a state of mechanical completion. Remuneration under this contract includes reimbursement of payments to subcontractors for services rendered and equipment delivered, and management services fee.

The Group’s management considered that under this project the customer has a significant control over the construction process, including approval by OOO Gazprom Pererabotka Blagoveshchensk of contracts with subcontractors and preapproval of services rendered and equipment delivered by subcontractors before the acceptance by NIPIGAZ; also the customer bears credit risk considering the financing of this contract in line with schedules stipulated in subcontractors’ agreements. Thus, part of the remuneration under this contract, which is received from the customer and transferred to subcontractors for construction services and equipment delivery, is not recognized as revenue in the consolidated statement of profit or loss. Remuneration for management services rendered by NIPIGAZ is recognized within other revenue in the consolidated statement of profit or loss.

F-143 36 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

16 ADVANCES ISSUED AND RECEIVED UNDER PROJECT MANAGEMENT SERVICES (CONTINUED)

Advances received from OOO Gazprom Pererabotka Blagoveshchensk under this contract were paid in full to suppliers and subcontractors as advances for their respective works. The Group’s management considers the terms of advances received and paid based on the expected date of its utilisation in full amount, linked to contractual terms.

As of 31 December 2017 and 31 December 2016, the total amount of advances received from OOO Gazprom Pererabotka Blagoveshchensk under this contract is presented in the long-term advances received under project management services line in the amount of RR 57,099 and RR 33,669, respectively, and in the short-term advances received under project management services line in the amount of RR 33,544 and RR 2,587, respectively, in the consolidated statement of financial position. Advances paid are presented in the long-term advances issued under project management services line in the amount of RR 52,027 and RR 33,109, respectively, and in the short-term advances issued under project management services line in the amount of RR 38,093 and RR 3,356, respectively, in the consolidated statement of financial position.

Advances issued and received under project management services also include advances under the project of construction of combined oil refining unit for AO Gazpromneft-MNPZ and the project of construction of utilities, infrastructure and offsites for AO Gazpromneft-ONPZ. Under these projects NIPIGAZ acts as Engineering, Procurement and Construction contractor.

17 PREPAID BORROWING COSTS

As of 31 December 2017 and 31 December 2016, prepaid borrowing costs of RR 6,762 and RR 7,141, respectively, included credit agencies premiums and fees for arranging long-term credit facilities for the Group’s subsidiary, ООО ZapSibNeftekhim, for the ZapSib execution. The current portion of prepaid borrowing costs of RR 4,455 and RR 3,709 as of 31 December 2017 and 31 December 2016, respectively, is accounted for under loans and borrowings within one year from the reporting date.

18 TRADE AND OTHER RECEIVABLES

31 December 2017 31 December 2016 Trade receivables (net of impairment provisions of RR241 and RR830 as of 31 December 2017 and 31 December 2016, respectively) 25,342 18,909 Other receivables (net of impairment provisions of RR263 and RR174 as of 31 December 2017 and 31 December 2016, respectively) 2,804 2,980 Total trade and other receivables 28,146 21,889 Less non-current portion: other receivables (Notes 4, 19 and 39) (2,408) (1,754) 25,738 20,135

The fair values of trade and other receivables approximate their carrying values. As of 31 December 2017 and 2016, respectively, RR 869 and RR 807 in trade receivables were secured by bank guarantees and other collaterals. All non-current receivables are due up to twenty years from reporting period date.

F-144 37 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

18 TRADE AND OTHER RECEIVABLES (CONTINUED)

The aging analysis of receivables that are past due but not impaired is as follows:

Trade receivables Other receivables Total As of 31 December 2017 Up to three months 1,572 12 1,583 Three to twelve months 88 3 91 Total 1,660 14 1,674 As of 31 December 2016 Up to three months 618 115 733 Three to twelve months 57 2 59 Total 675 117 792

Movements in the Group’s provision for impairment of receivables are as follows:

Trade receivables Other receivables Total As of 31 December 2015 232 177 409 Written off during the year as uncollectible (251) (28) (279) Unused amounts reversed (42) (41) (83) Acquisition of subsidiary 104 - 104 Impairment for receivables 787 66 853 As of 31 December 2016 830 174 1,004 Written off during the year as uncollectible (437) (2) (439) Unused amounts reversed (298) (91) (389) Impairment for receivables 146 182 328 As of 31 December 2017 241 263 504

The impairment provision was accrued on trade and other receivables that are more than 365 days past due or in case of specific impairment indicators for particular debtors. Accrual and release of the impairment provision have been recognized within other operating expenses in the consolidated statement of profit or loss. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.

19 OTHER NON-CURRENT ASSETS

31 December 2017 31 December 2016 Raw natural gas liquids in pipelines 1,977 1,975 Prepaid employee services 494 - Advances issued 175 112 Other 202 63 Total other non-current assets 2,848 2,150

In 2017, the Group announced a long-term incentive program for employees relocating to Tobolsk for launching and operating of ZapSib (“Program”). Under the Program, the Group provides to employees free of charge residential apartments located in Tobolsk during the five-year period from the relocation date. After five-year period from the relocation date an employee has an option to purchase apartment at a price lower than the Group cost incurred for the respective apartment (“Option”), payable during five- year period after the Option exercise date.

Under the Program the Group entered in the arrangement with Agency for Housing Mortgage Lending (“AHML”) who purchased from and leased-back to the Group apartments entitled under the Program to the Group’s employees. As of 31 December 2017, the Group recognized liability to AHML as payables under the Program in other non-current liabilities in the consolidated statement of financial position (see Note 28). The current portion of this liability was recognized in other payables in trade and other payables line of the consolidated statement of financial position.

F-145 38 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

19 OTHER NON-CURRENT ASSETS (CONTINUED)

Also, the Group recognized long-term receivables from employees in other long-term receivables in the consolidated statement of financial position in the amount of RR 187 as of 31 December 2017. Long- term receivables were recognized at present value of future cash flows payable by the Group’s employees under the Program if they exercise the Option.

The difference between the net book value of apartments sold to AHML and long-term receivables from employees recognized under the Program was accounted for as prepaid employee services in other non- current assets in the consolidated statement of financial position in the amount of RR 494 as of 31 December 2017. Prepaid employee services are expensed on a straight-line basis during ten-years from the relocation date. For the year ended 31 December 2017, the Group recognized RR 55 as expenses under the Program which were capitalized in cost of assets under construction of ZapSib.

20 INVENTORIES

31 December 2017 31 December 2016 Refined products and work in progress 17,822 16,689 Materials and supplies 11,855 12,670 Goods for resale 2,057 1,633 Total inventories 31,734 30,992

As of 31 December 2017 and 31 December 2016, inventory write-downs amounted to RR 357 and RR 281, respectively. No significant reversals of previous inventory write-downs were made during the years ended 31 December 2017 and 31 December 2016.

21 LOANS RECEIVABLE 31 December 2017 31 December 2016 OOO RusVinyl 1,499 - AO Sibgazpolimer - 846 Other 15 125 Total loans receivable 1,514 971 Less non-current portion: (1,501) - 13 -

In the first half 2016, the Group issued loans to entities controlled by several members of the Company’s Board of Directors and key management personnel for a total amount of RR 1,203, part of which was paid back in cash in the second half 2016. As of 31 December 2016, the outstanding balance of these loans was RR 120, which was paid back in cash in the first half 2017. The Group provided loans to its related parties on an arm’s length basis.

The fair values of loans receivable approximate their carrying value.

F-146 39 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

22 PREPAYMENTS AND OTHER CURRENT ASSETS

31 December 2017 31 December 2016 Non-financial assets VAT receivable 8,818 6,477 Prepayments and advances to suppliers 7,828 4,637 Recoverable VAT 4,077 2,210 Prepaid excise 1,344 1,015 Recoverable excise 835 705 Other prepaid taxes and custom duties 750 944 Other current assets 224 177 Total non-financial assets 23,876 16,165 Financial assets Other financial assets 209 216 Total financial assets 209 216 Total prepayments and other current assets 24,085 16,381

23 BANK DEPOSITS

In October 2016, the Group signed a USD 414 million long-term deposit agreement due in March 2023. The main terms of the deposit agreement, including maturity schedule and interest rate, matched with the respective terms of the agreement, under which the Group had obtained a loan from the same bank. This transaction meets the pass-through arrangement criteria defined in IAS 39 “Financial Instruments: Recognition and Measurement”. On the transaction date, therefore, the long-term deposit and long-term loan were derecognised by the Group from its consolidated statement of financial position.

In March 2017 bank released the Group from a payment of the loan portion in the amount of USD 23,5 million, simultaneously deposit was decreased by the same amount and rouble equivalent of RR 1,384 was returned to the Group; this development does not breach the pass-through arrangement criteria.

24 CASH AND CASH EQUIVALENTS

Cash and cash equivalents included deposits held in banks, which are readily convertible to cash and have an original maturity of less than three months, of RR 31,403 and RR 19,522 as of 31 December 2017 and 31 December 2016, respectively, and cash in transit in the amount of RR 1,798 as of 31 December 2017.

F-147 40 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

25 LONG-TERM DEBT EXCLUDING RELATED TO ZAPSIBNEFTEKHIM

Long-term debt payable to Currency Due 31 December 2017 31 December 2016 Variable rate Bank GPB RR 2023 22,000 - Raiffeisen Bank USD 2021 5,760 6,043 Deutsche Bank EUR 2014-2023 4,589 5,058 ING Bank Group EUR, USD 2011-2021 531 767 UniCredit Bank EUR 2013-2019 445 618 NPP Neftekhimia RR 2020 175 825 VTB Bank RR 2021 - 5,000 Sberbank of Russia RR 2018-2021 - 1,415 Fixed rate Russian rouble bonds RR 2019-2021 30,000 30,000 Eurobonds 2023 USD 2023 28,616 - Eurobonds 2018 USD 2018 25,528 37,352 Alfa-Bank USD 2019 14,400 15,164 UniCredit Bank Group RR 2022 4,974 12,917 Sberbank of Russia RR 2020-2022 1,896 20,000 Gazprom mezhregiongaz RR 2011-2018 233 544 Bank GPB RR 2021 - 22,000 VTB Bank RR 2021 - 4,988 Other USD 2031 - 26 Total long-term debt excluding related to ZapSibNeftekhim 139,147 162,717 Less: current portion (Note 30) (27,361) (1,862) 111,786 160,855

Eurobonds 2018. On 31 January 2013, the Group issued notes worth USD 1 billion on the Irish Stock Exchange, bearing 3.914 percent annual interest and maturing in 2018. The Group used the aggregate net proceeds from the notes issue to refinance short-term debt and for general corporate purposes. In 2016, the Group placed an offer to buy back notes before its original maturity date in the amount of USD 193.8 million in September at nominal value and USD 190 million in December at USD 1,017.5 per note with nominal value of USD 1,000 each. These bought-back notes were redeemed in full in 2016, and related loss on early redemption was recognized in the amount of RR 205 within other finance expenses in the consolidated statement of profit or loss for the year ended 31 December 2016.

In September 2017, the Group placed an offer to buy back notes before its original maturity date at USD 1,009 per note with nominal value of USD 1,000 each. The tender offer was accepted by the holders of notes worth of USD 172 million nominal value. These bought-back notes were redeemed in full in 2017, and related loss on early redemption was recognized in the amount of RR 90 within other finance expenses in the consolidated statement of profit or loss for the year ended 31 December 2017. The nominal amount of notes outstanding as of 31 December 2017 was USD 443.2 million. In January 2018, the outstanding amount of Eurobonds 2018 was paid in full.

Eurobonds 2023. On 05 October 2017, the Group issued notes worth USD 500 million on the Irish Stock Exchange, bearing 4.125 percent annual interest and maturing in 2023. The Group used the aggregate net proceeds from the notes issue for an early redemption of the Eurobonds 2018 issue and for general corporate purposes. The nominal amount of notes outstanding as of 31 December 2017 was USD 500 million.

Russian rouble bonds. In 2016, the Group placed three 10-year, non-convertible, rouble-denominated bond issues in the amount of RR 10,000 each on Moscow Exchange with an annual fixed coupons payable on a semi-annual basis. The first issue was on 29 March 2016 with a coupon rate of 10.5 percent for 5 subsequent years, the second and third issues were on 3 August 2016 and 28 September 2016 with a coupon rates of 9.65 percent for 3 and 3.5 subsequent years, respectively. At the end of periods with defined coupon rate, bondholders may request that the Group redeems the bonds. The Group allocated the aggregate net proceeds from the bond issue toward refinancing its long- term debt.

F-148 41 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

25 LONG-TERM DEBT EXCLUDING RELATED TO ZAPSIBNEFTEKHIM (CONTINUED)

The Group had no subordinated debt and no debts that may be converted into an equity interest in the Group.

The scheduled maturities of long-term debt excluding related to the ZapSib as of 31 December 2017 and 31 December 2016 are presented below:

31 December 2017 31 December 2016 Due for repayment: Between one and two years 25,639 39,074 Between two and five years 35,258 114,868 More than five years 50,889 6,913 Total long-term debt excluding related to ZapSibNeftekhim 111,786 160,855

The carrying amounts of long-term fixed-rate borrowings approximate their fair value as of 31 December 2017 and 31 December 2016, except for those, which fair value is disclosed in Note 39.

The carrying amounts of long-term debts with variable interest rates linked to LIBOR, EURIBOR or the Central Bank of Russia key interest rate approximate their fair value.

As of 31 December 2017 and 31 December 2016, the Group had the following committed long-term credit facilities excluding related to the ZapSib:

Credit limit Undrawn amount As of 31 December 2017 USD-denominated (in millions of USD) 349 249 RR-denominated (in millions of RR) 6,000 6,000 As of 31 December 2016 USD-denominated (in millions of USD) 175 175 RR-denominated (in millions of RR) 9,300 7,885

As of 31 December 2017 and 31 December 2016, the total rouble equivalent of the Group’s undrawn committed long-term credit facilities excluding related to the ZapSib was RR 20,320 and RR 18,500, respectively.

26 LONG-TERM ZAPSIBNEFTEKHIM RELATED DEBT

Long-term debt payable to Currency Due 31 December 2017 31 December 2016 Variable rate National Wealth Fund financing USD 2030 100,800 106,150 Deutsche Bank (ECA financing) EUR 2020-2029 49,096 36,391 ING Bank Group (ECA financing) EUR 2013-2029 2,246 2,417 Citibank (ECA financing) USD 2013-2023 1,612 1,989 Fixed rate Russian Direct Investment Fund USD 2018-2020 12,096 12,738 Credit Agricole (ECA financing) EUR 2019-2029 7,347 - Total long-term ZapSibNeftekhim related debt 173,197 159,685 Less: current portion (2,485) (915) 170,712 158,770

National Wealth Fund. On 4 December 2015, OOO ZapSibNeftekhim issued 15-year bonds worth USD 1,750 million to the Russian Federation Ministry of Finance. As a result, the Group received financing from Russia’s National Wealth Fund.

F-149 42 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

26 LONG-TERM ZAPSIBNEFTEKHIM RELATED DEBT (CONTINUED)

Deutsche Bank. In December 2014, the Group signed an agreement with a consortium of European banks led by Deutsche Bank to raise a long-term export credit agency financing (“ECA financing”) credit facility in the amount of EUR 1,575 million, which was increased in October 2015 by EUR 101 million to a total amount of EUR 1,676 million. As of 31 December 2017 and 31 December 2016, the Company had drawn down EUR 764 and EUR 615 million from this credit facility.

Russian Direct Investment Fund. In November 2015, a consortium of investors, consisting of the Russian Direct Investment Fund and leading Middle Eastern sovereign wealth funds, provided a loan to OOO ZapSibNeftekhim in the amount of USD 210 million.

The scheduled maturities of long-term ZapSib related debt as of 31 December 2017 and 31 December 2016 are presented below:

31 December 2017 31 December 2016 Due for repayment: Between one and two years 7,382 2,506 Between two and five years 23,078 20,543 Between five and ten years 28,488 18,655 More than ten years 111,764 117,066 Total long-term ZapSibNeftekhim related debt 170,712 158,770

The carrying amounts of long-term fixed-rate borrowings approximate their fair value as of 31 December 2017 and 31 December 2016.

The carrying amounts of long-term debt with variable interest rates linked to LIBOR, EURIBOR or USA CPI approximate their fair value.

As of 31 December 2017 and 31 December 2016, the Group had the following committed long-term ZapSib related credit facilities:

Credit limit Undrawn amount As of 31 December 2017 EUR-denominated (in millions of EUR) 2,166 1,284 USD-denominated (in millions of USD) 400 400 As of 31 December 2016 EUR-denominated (in millions of EUR) 2,088 1,473

As of 31 December 2017 and 31 December 2016, the total rouble equivalent of the Group’s undrawn committed long-term ZapSib related credit facilities was RR 111,495 and RR 93,967, respectively.

Total Group’s long-term debt both including and excluding related to the ZapSib bore the following average interest rates: RR-denominated of 9.3 percent and 10.9 percent as of 31 December 2017 and 31 December 2016, respectively; USD-denominated of 4.0 percent and 3.3 percent as of 31 December 2017 and 31 December 2016, respectively; and EUR-denominated of 1.2 percent and 1.1 percent as of 31 December 2017 and 31 December 2016, respectively.

F-150 43 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

27 GRANTS AND SUBSIDIES

As a major investor in infrastructure and social projects in the regions where it operates, the Group has signed cooperation agreements with a number of regional authorities, including investment and financial support agreements. Under these agreements, the Group is entitled to a partial refund of capital expenditures and finance expenses incurred in the respective regions subject to certain conditions. Such refunds are made, either in the form of an income tax rebate or a direct grant of public funds, after the Group submits appropriate supporting documents to the relevant regional authority.

2017 2016 Grants and subsidies as of 1 January 41,082 42,096 Grants and subsidies received 11,274 1,723 Recognized in profit or loss (depreciation) (3,636) (2,737) Grants and subsidies as of 31 December 48,720 41,082

28 OTHER NON-CURRENT LIABILITIES

31 December 2017 31 December 2016 Financial liabilities Payables for acquisition of subsidiaries 5,792 6,496 Accounts payable to contractors and suppliers of property, plant and equipment 2,778 1,988 Payables under accommodation program (Note 19) 2,278 - Trade payables 1,137 - Other liabilities 6 - Total financial non-current liabilities 11,991 8,484 Non-financial liabilities Post-employment obligations 2,401 2,121 Payables to employees 2,181 1,773 Advances received 2 12 Total non-financial non-current liabilities 4,584 3,906 Total other non-current liabilities 16,575 12,390

As of 31 December 2017 and 2016, payables for the acquisition of subsidiaries included payables for the acquisition of OOO Tobolsk HPP of RR 4,674 and RR 4,798, respectively, and AO Polief of RR 1,060 and RR 1,645, respectively.

The Group maintains a cash-settled long-term incentive (LTI) plan. Among other factors, remuneration under the LTI plan is contingent upon the contribution that management makes toward increases in the Group’s business fair value, which is measured by changes in the Group’s business fair value divided by the median change in the business fair values of certain other international corporations operating in the petrochemical industry. The LTI plan requires that participants provide services to the Group within a specific time period. Remuneration granted is vested to each participant on an annual basis and in separate tranches. Each tranche equals 33.3 percent of the total remuneration granted, provided that the participant is continuously employed by the Group from the grant date until the applicable vesting date. Each tranche is accounted for as a separate arrangement and expensed, together with a corresponding increase within payables to employees in other non-current liabilities. The current portion of liabilities under the long-term incentive plan is classified within payables to employees in trade and other payables. For the years ended 31 December 2017 and 31 December 2016, the Group recognized RR 915 and RR 290, respectively, as expenses under the LTI plan.

The carrying amounts of other non-current liabilities approximate their fair value.

F-151 44 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

29 TRADE AND OTHER PAYABLES

31 December 2017 31 December 2016 Financial liabilities Accounts payable to contractors and suppliers of property, plant and equipment 41,009 11,605 Trade payables 34,711 19,377 Payables for acquisition of subsidiaries (Note 4) 2,619 2,104 Interest payable 2,087 2,182 Other payables 514 1,406 Total financial trade and other payables 80,940 36,674 Non-financial liabilities Payables to employees 7,948 6,818 Advances from customers 5,163 4,951 Other payables 1,309 1,564 Total non-financial trade and other payables 14,420 13,333 Total trade and other payables 95,360 50,007

As of 31 December 2017 and 2016, payables for the acquisition of subsidiaries included payables for the acquisition of OOO Tobolsk HPP of RR 1,881 and RR 1,985, respectively, and AO Polief of RR 738 and RR 119 respectively.

As of 31 December 2017 and 2016, payables to employees included provisions for annual bonuses, other bonuses and vacation accruals (including provisions for social taxes) of RR 7,948 and RR 6,818, respectively.

30 SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT EXCLUDING RELATED TO ZAPSIBNEFTEKHIM

31 December 2017 31 December 2016 Short-term debt: USD-denominated debt - 19,411 Total short-term debt - 19,411 Current portion of long-term debt excluding related to ZapSibNeftekhim (Note 25) 27,361 1,862 27,361 21,273

Short-term USD-denominated debt bore average interest rate of 1.5 percent as of 31 December 2016. The carrying amount of short-term debt approximates its fair value.

As of 31 December 2017 and 31 December 2016, the Group had no committed short-term credit facilities.

31 TAXES OTHER THAN INCOME TAX PAYABLE

31 December 2017 31 December 2016 VAT 6,918 4,676 Property tax 919 355 Social taxes 620 500 Other taxes 93 84 Total taxes other than income tax payable 8,550 5,615

F-152 45 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

32 SHAREHOLDERS’ EQUITY

As of 31 December 2017 and 31 December 2016, the Group didn’t have direct parent company and an ultimate controlling shareholder.

Share capital. The share capital of PAO SIBUR Holding (authorised, issued and paid-in) was RR 21,784 as of 31 December 2017 and 31 December 2016, and consisted of 2,178,479,100 ordinary shares, each with a par value of ten Russian roubles.

Dividends. Dividends in the amount of RR 19,171 (8.80 Russian roubles per share) and RR 14,313 (6.57 Russian roubles per share) were paid during years ended 31 December 2017 and 31 December 2016, respectively.

Equity-settled share-based payment plans for directors and key management. On 28 June 2013, a company beneficially owned by Mr Leonid V. Mikhelson and Mr Gennady N. Timchenko granted equity-settled share-based payment plans to certain current and former members of the Group’s key management. The plan required that the participants provided services to the Group within a certain time period. The shares granted were vested to each participant annually in tranches. Each tranche was accounted for as a separate arrangement and expensed, together with a corresponding increase in shareholders’ equity, on a straight-line basis over the vesting periods. In the first quarter of 2015, the plan was modified by shareholders. As a result the shares granted were immediately vested and the remaining tranches were expensed and recognized in the consolidated statement of profit or loss with a corresponding increase in shareholders’ equity.

F-153 46 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

33 NON-CONTROLLING INTEREST

The following table provides information about each subsidiary with a non-controlling interest:

Propor- Proportion Total tion of of non- comprehen- Transac- Accumula- non- controlling sive income tions with ted non- Place control- interest’s attributab- non- controlling of ling voting le to non- control- interest in busi- interest, rights held, controlling ling Divi- the ness percent percent interest interest dends subsidiary Year ended 31 December

2017 AO NIPIgazpererabotka Russia 55 50 3,182 - (513) 4,749 AO Krasnoyarsk Synthetic Rubbers Plant Russia 25 25 43 - (25) 192 OOO PlasticGeosintetika Russia 33 33 (16) - - 65 OOO SIBUR Krasnodar* Russia 55 50 24 - - (53) OOO LNG NOVAENGINEERING* Russia 55 50 99 - - 99 3,332 - (538) 5,052 Year ended 31 December

2016 AO Polief** Russia - - - (693) - - AO NIPIgazpererabotka Russia 55 50 2,050 1,628 (1,850) 2,080 AO Krasnoyarsk Synthetic Rubbers Plant Russia 25 25 (3) - - 174 OOO PlasticGeosintetika Russia 33 33 (13) - - 81 OOO SIBUR Krasnodar* Russia 55 50 (77) - - (77) 1,957 935 (1,850) 2,258 *a subsidiary of AO NIPIgazpererabotka **remaining interest was purchased by the Group in 2016 (see Note 4)

During the year ended 31 December 2017 and 2016 the Group’s subsidiary AO NIPIgazpererabotka distributed dividends in the amount of RR 513 and RR 1,850 respectively to non-controlling shareholders including those that simultaneously serve as senior management of the Group.

The summarised financial information of AO NIPIgazpererabotka before inter-company eliminations was as follows:

As of and for the year ended 31 December 2017 31 December 2016

Non-current assets 71,439 40,952 Current assets 52,000 10,831

Non-current liabilities 60,437 35,894 Current liabilities 54,292 12,028

Revenue 26,184 14,220

F-154 47 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

34 INCOME TAX

The movement in deferred income tax assets and liabilities during the year was as follows:

Decon- (Charged)/ Reclassifi- Business (Charged)/ Reclassifi- solidation and credited to cations to combinations credited to cations to / 31 December disposal of profit or assets held 31 December and acquisi- profit or from assets 31 December 2017 subsidiaries loss/equity for sale 2016 tions loss/equity held for sale 2015 Tax effects of taxable temporary differences Property, plant and equipment (26,088) 20 (3,255) - (22,853) (445) (2,461) 216 (20,163) Intangible assets (19,099) - 1,188 - (20,287) (823) 1,524 - (20,988) Trade and other receivables (6,600) - (3,762) 304 (3,142) - (59) - (3,083) Prepaid borrowing costs (1,349) - 29 - (1,378) - 315 - (1,693) Debt (858) - (103) - (755) - (443) - (312) Inventory (163) - 186 - (349) (29) (158) - (162) Others (106) - 31 - (137) - 104 - (241) Deferred tax liabilities (54,263) 20 (5,686) 304 (48,901) (1,297) (1,178) 216 (46,642) Less: deferred tax assets offset 15,533 - 1,283 (296) 14,546 195 33 14,318 Total deferred tax liabilities (38,730) 20 (4,403) 8 (34,355) (1,297) (983) 249 (32,324) Tax effects of deductible temporary differences Tax loss carry-forwards 14,560 - (631) - 15,191 - (3,182) 55 18,318 Grants and subsidies 7,029 - (232) - 7,261 - (624) - 7,885 Payables to employees 2,184 - 342 - 1,842 - (219) - 2,061 Trade and other payables 1,605 - 930 - 675 - 675 - - Inventory 1,266 - 850 - 416 - (523) (6) 945 Intangible assets 126 - (21) - 147 - (50) - 197 Others 494 (10) 705 (296) 95 10 (267) - 352 Deferred tax assets 27,264 (10) 1,943 (296) 25,627 10 (4,190) 49 29,758 Less: deferred tax liabilities offset (15,533) - (1,283) 296 (14,546) - (195) (33) (14,318) Total deferred tax assets 11,731 (10) 660 - 11,081 10 (4,385) 16 15,440 Total net deferred tax liabilities (26,999) 10 (3,743) 8 (23,274) (1,287) (5,368) 265 (16,884)

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realisation of the related tax benefits through future taxable profits is probable. Under the Russian Tax Code, during the period from 1 January 2017 to 31 December 2020 only up to 50% of a taxable income can be covered by tax losses carry- forward from previous periods. After 31 December 2020 a tax income can be covered by tax losses carry-forward from previous periods in full amount. Tax losses can be carried forward until fully recognized without time limitation.

F-155 48 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

34 INCOME TAX (CONTINUED)

Year ended 31 December 2017 2016 Current income tax: Current income tax on profits for the year 25,971 24,228 Adjustments for prior years (43) (85) Total current income tax 25,928 24,143 Deferred income tax: Accrual of temporary differences 3,743 5,320 Total deferred income tax 3,743 5,320 Total income tax expense 29,671 29,463

The tax on the Group’s profit before income tax differs from the theoretical amount that would arise if the Russian statutory tax rate to the consolidated profit was used as follows:

Year ended 31 December 2017 2016 Profit before income tax 149,917 142,552 Theoretical income tax expense at statutory rate of 20 percent (29,983) (28,510) Tax effect of items which are not deductible or assessable for taxation purposes: Non-deductible expenses (667) (3,930) Other non-taxable income 979 2,977 Total income tax (expense) (29,671) (29,463)

As of 31 December 2017 and 2016 the Group prepaid income tax of RR 2,334 and RR 5,523, respectively. This prepayment may not be utilised by the Group within 12 months as it depends on the Group’s profit earned within 12 months. The Group did not classify this portion of prepaid income tax as non-current asset as it expects to realise this asset in its normal operating cycle.

F-156 49 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

35 CASH GENERATED FROM OPERATIONS AND NET DEBT RECONCILIATION Year ended 31 December Notes 2017 2016 Profit before income tax 149,917 142,552 Adjustments to profit before income tax 7 Depreciation and amortization 35,486 34,996 8 Interest expense 6,416 13,880 28, 29 Accrual of bonuses 1,668 1,005 8 Unwinding of discount on non-current accounts payable 1,178 1,094 Result of subsidiary’s acquisition and remeasurement of related 4, 39 liabilities 965 (1,666) 8 Bank commissions 783 3,619 7 Loss on disposal of property, plant and equipment 319 172 8 Pension liabilities 191 209 5, 7 Impairment of assets held for sale 180 - 7 Impairment of property, plant and equipment 164 1,502 8 Loss on derivative financial instruments - realized - 2,084 8 Change in fair value of derivative financial instruments - (2,188) 18 (Reversal of impairment)/impairment of trade and other receivables (72) 616 Discount on borrowings and non-current accounts payable (93) - Unwinding of discount on loans receivable and non-current 8 accounts receivable (142) (247) Provision for court decisions (201) 677 8, 23 Gain on the loan release (1,384) - 8 Interest income (2,012) (1,013) 15 Share of net income of joint ventures and associates (2,073) (6,471) 8 Foreign exchange gain from investing and financing activities, net (9,495) (48,968) 4 Gain on disposal of subsidiary (19,805) - Other adjustments (50) 289 Operating cash flows before working capital changes 161,940 142,142 Changes in working capital Increase in advances received under project management services 56,670 41,412 Increase in trade and other payables 17,660 2,699 Increase in taxes payable 2,878 2,316 (Increase)/decrease in trade and other receivables (3,944) 1,016 Increase in prepayments and other current assets (7,744) (87) Increase in inventories (1,156) (1,153) Increase in advances issued under project management services (53,987) (37,739) Total changes in working capital 10,377 8,464 Cash generated from operating activities before income tax payment 172,317 150,606 Income tax paid (19,640) (12,912) Net cash from operating activities 152,677 137,694

For the years ended 31 December 2017 and 31 December 2016, the reconciliation of net debt was as follows:

Cash and cash Long-term and

equivalents short-term debt Net debt As of 31 December 2015 172,083 (457,149) (285,066) Cash flows (109,267) 64,036 (45,231) Foreign exchange adjustments (2,181) 47,817 45,636 Other non-cash movements - 3,483 3,483 As of 31 December 2016 60,635 (341,813) (281,178) Cash flows (11,132) 23,087 11,955 Foreign exchange adjustments (1,047) 5,758 4,711 Other non-cash movements - 624 624 As of 31 December 2017 48,456 (312,344) (263,888)

F-157 50 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

36 PRINCIPAL SUBSIDIARIES

Principal wholly owned operating subsidiaries of the Group:

OOO BIAXPLEN OOO SIBUR Tobolsk OOO BIAXPLEN T OOO SIBUR Togliatti OOO SIBUR GEOSINT OOO Tomskneftekhim SIBUR International GmbH AO Sibur-Himprom AO Sibur-Neftehim AO Voronezhsintezkauchuk AO SIBUR-PET AO Siburenergomenedgment AO SIBUR-Trans OOO Belozerny Gas Processing Complex OOO SIBUR-Kstovo OOO Nizhnevartovsky Gas Processing Complex OOO Zapsibtransgaz OOO Nyagangazpererabotka AO SiburTyumenGaz OOO ZapSibNeftekhim AO Polief

Other principal operating subsidiaries of the Group:

Effective percent of share capital

held by the Group as of 31 December 2017 31 December 2016 AO NIPIgazpererabotka 45 45 AO Krasnoyarsk Synthetic Rubbers Plant 75 75 OOO PlasticGeosintetika 67 67

The changes in the composition of the Group and changes in the ownership interest in the subsidiaries are disclosed in Notes 3 and 4.

As of 31 December 2017 and 31 December 2016 the voting and ownership percentage in the Group’s subsidiaries with a non-controlling interest are the same, except for AO NIPIgazpererabotka in which the Group had 50 percentage voting rights (see Note 3).

The Group’s operating subsidiaries are registered and located in the Russian Federation, except for SIBUR International GmbH, an export trading company of the Group registered in Austria.

37 RELATED PARTIES

Related parties may enter into transactions that unrelated parties may not enter into, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties.

The nature of the related-party relationships for those related parties with whom the Group entered into significant transactions during the years ended 31 December 2017 and 2016, or had significant balances outstanding as of 31 December 2017 and 31 December 2016, are presented below.

F-158 51 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

37 RELATED PARTIES (CONTINUED)

a) Significant transactions with parties under control or joint control of Mr Gennady N. Timchenko

During the years ended 31 December 2017 and 31 December 2016, the Group entered into transactions with AO Stroytransgaz and its subsidiaries (jointly, the AO “Stroytransgaz Group”), controlled by Mr G. N. Timchenko, who is a member of key management personnel of the Group. These transactions primarily included purchases by the Group from AO Stroytransgaz Group of construction, repair and maintenance services.

The Group had the following transactions with AO Stroytransgaz Group for years ended 31 December 2017 and 2016:

Year ended 31 December 2017 2016 Operating and investing activities Sales of other goods and services 1 4 Purchases of construction and repair and maintenance services (2) (680)

As of 31 December 2017 and 2016 the Group didn’t have balances and contractual capital commitments with AO Stroytransgaz Group. b) Remuneration of directors and key management

During 2017 the Company’s Board of Directors comprised eleven individuals (in 2016 comprised ten individuals), including shareholder representatives. Members of the Board of Directors are entitled to annual compensation, as approved by the Annual General Shareholders’ Meeting.

In 2017 and 2016, the Company accrued RR 98 and RR 88 net of social taxes, respectively, to Board of Directors members as part of their compensation for the years ended 31 December 2017 and 2016.

In January 2017, the number of key management personnel comprised 16 individuals and since February 2017 comprised 15 individuals. During the first six month of 2016 the number of key management personnel comprised 15 individuals and during the second half of the year ended 31 December 2016 comprised 16 individuals. Key management personnel are entitled to salaries, bonuses, voluntary medical insurance and other employee benefits (see Notes 28 and 29). Remuneration for key management personnel is determined by the terms set out in the relevant employment contracts and is substantially linked to the financial performance of the Group. Remuneration of key management personnel amounted to RR 1,836 and RR 1,401 net of social taxes for the years ended 31 December 2017 and 2016, respectively, including adjustments for accruals of provision for previous years. The growth of the remuneration of key management personnel for the year ended 31 December 2017 is due to increased financial results of the Group.

F-159 52 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

37 RELATED PARTIES (CONTINUED) c) Joint ventures

In 2017 and 2016, the Group had the following transactions with its joint ventures:

Year ended 31 December 2017 2016 Operating and investing activities Purchases of materials, goods and services (6,489) (8,129) Purchases of processing services (996) (949) Sales of materials, goods and services 8,413 7,186 Interest income 60 94 Interest expense (34) (135) Other financial income - 5 Other expense (4) (59)

As of 31 December 2017 and 2016, the Group had the following balances with its joint ventures:

31 December 2017 31 December 2016 Trade and other receivables 702 1,843 Loans receivable 1,507 846 Trade and other payables 2,322 1,621 Long-term debt - 825 Short-term debt 175 -

The Group provided and received loans to and from its joint ventures on market terms.

The Group has several agency arrangements with its joint ventures under which the Group is providing marketing, selling, construction management and procurement services. The agent remuneration earned by the Group under the agent arrangements is included in sales of materials line. The balances outstanding under the agent arrangements are included into trade and other payables and receivables.

38 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS

Financial assets 31 December 2017 31 December 2016 Non-current financial assets Trade and other receivables 1,672 1,035 Loans receivable 1,501 - Non-current financial assets classified as available for sale 736 719 Other non-current financial assets 23 26 Total non-current financial assets 3,932 1,780 Current financial assets Cash and cash equivalents 48,456 60,635 Trade and other receivables 25,738 20,135 Loans receivable 13 971 Other current financial assets 209 216 Total current financial assets 74,416 81,957 Total current and non-current financial assets 78,348 83,737

F-160 53 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

38 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (CONTINUED)

Financial liabilities 31 December 2017 31 December 2016 Non-current financial liabilities Other non-current liabilities 11,991 8,484 Debt 282,498 319,625 Total non-current financial liabilities 294,489 328,109 Current financial liabilities Trade and other payables 80,940 36,674 Debt 29,846 22,188 Total current financial liabilities 110,786 58,862 Total current and non-current financial liabilities 405,275 386,971

The table below summarises the Group’s exposure to foreign currency exchange risk at the reporting date: Denominated in As of 31 December 2017 USD EUR Other currency Cash and cash equivalents 26,501 1,957 92 Trade and other receivables 3,667 3,126 429 Non-current financial asset classified as available for sale 736 - - Total financial assets 30,904 5,083 521 Trade and other payables 5,915 26,653 1,824 Debt 188,857 64,208 - Total financial liabilities 194,772 90,861 1,824

Denominated in As of 31 December 2016 USD EUR Other currency Cash and cash equivalents 16,581 779 72 Trade and other receivables 3,287 1,795 491 Non-current financial asset classified as available for sale 719 - - Total financial assets 20,587 2,574 563 Trade and other payables 4,695 5,955 23 Debt 198,968 45,156 - Total financial liabilities 203,663 51,111 23

The sensitivity analysis given in the table below reflects the hypothetical gain/loss that would occur assuming the Russian rouble had weakened/strengthened by 20 percent against the US dollar and euro and that there were no changes in the securities portfolio and other variables as of 31 December 2017 and 2016, respectively.

F-161 54 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

38 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (CONTINUED)

Increase in exchange rate 31 December 2017 31 December 2016 Effect on profit before income tax RR / USD 20 percent (32,774) (36,615) RR / EUR 20 percent (17,156) (9,707)

Decrease in exchange rate 31 December 2017 31 December 2016 Effect on profit before income tax RR / USD 20 percent 32,774 36,615 RR / EUR 20 percent 17,156 9,707

Cash flow and fair value interest rate risk. The Group is exposed to interest rate risk primarily due to short- and long-term debt at variable rates. Debt issued at fixed rates exposes the Group to fair value interest rate risk. As of 31 December 2017 and 2016, the Group’s debt at variable rates was denominated in Russian roubles, US dollars and euro (see Notes 25, 26, 30). As of 31 December 2017 and 2016, the Group’s interest-bearing assets were primarily comprised by loans receivable and cash deposits. The Group analyses its interest rate exposure on a regular basis. The Group’s management makes financial decisions after careful consideration of various scenarios, which may include refinancing, renewing existing positions or alternative financing.

If variable interest rates were higher/lower, assuming all other variables remain constant, the Group’s profit before income tax would change as follows:

Increase in floating rates by 31 December 2017 31 December 2016 Effect on profit before income tax RUR-denominated debt 10 percent (172) (63) USD-denominated debt 10 percent (223) (120)

Decrease in floating rates by 31 December 2017 31 December 2016 Effect on profit before income tax RUR-denominated debt 10 percent 172 63 USD-denominated debt 10 percent 223 14

Credit risk. The Group is exposed to credit risk primarily due to cash and cash equivalents, loans issued and customers credit risks.

The Group deposits cash and cash equivalents only in banks that have minimal risk of default within set credit limits at the deposit date.

A large portion of the Group’s receivables from domestic sales relates to large companies such as Rosneft, Gazprom Pererabotka and Novatek, with low credit risks. The Group’s export customers are also key market players such as BOREALIS AG, SHV Gas Supply & Risk Management, Gunvor SA. The Group sells its products on export sales based on prepayments or advances received or secures its export sales by letters of credit. The Group assesses the credit quality of its customers based on market segment, customer’s financial position, its market share past experience and other relevant factors. Although economic factors affecting the Group’s customers influence cash collection of the Group’s accounts receivable, the Group’s management assesses that there is no significant risk of loss other than bad debts provided as of 31 December 2017.

As of 31 December 2017 and 2016, the maximum credit risk exposure due to accounts receivable was RR 28,378 and RR 22,129 respectively.

The Group estimates the fair value of its financial liabilities as a close-out amount that does not incorporate changes in credit risks.

F-162 55 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

38 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (CONTINUED)

The table below shows the credit limit and balance of cash and cash equivalents of the Group’s major counterparty groups as of the reporting date.

As of and for the year ended 31 December 2016 Bank equity Rating Credit limit for one bank Balance Major banks >=25,000 BBB-, BB- USD 200 mln, in individual cases 60,606 -unlimited Other banks Not set Not set Individually set 29 Total cash and cash equivalents 60,635

The Group did no exceed its credit limits during the reporting period, and the Group’s management does not expect any losses resulting from these counterparties’ non-performance. As of 31 December 2017 and 2016, the maximum credit risk exposure due to cash and cash equivalents was RR 48,456 and RR 60,635, respectively.

Liquidity risk and capital risk management. Liquidity risk management includes maintaining sufficient cash balances, available funding from an adequate amount of committed credit facilities, and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Group’s management maintains funding flexibility by ensuring funds availability under committed credit lines and expected cash flows from operating activities. Management monitors rolling forecasts of the Group’s liquidity reserve, comprising the undrawn debt facilities (see Notes 25, 26, 30), and cash and cash equivalents on the basis of expected cash flow. This is carried out at the Group level on a monthly and annual basis. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet cash requirements while maintaining debt financing plans.

The table below analyses the Group’s non-derivative financial liabilities in relevant maturity groupings based on the remaining period at the reporting date up to the contractual maturity date.

Less than Between one Between two As of 31 December 2017 one year and two years and five years Over five years Debt 41,949 44,601 83,950 222,096 Trade and other payables 78,698 4,749 6,974 5,939 Total 120,647 49,350 90,924 228,035 As of 31 December 2016 Debt 39,432 57,794 163,217 165,285 Trade and other payables 34,492 3,015 6,884 1,938 Total 73,924 60,809 170,101 167,223

Guarantees issued by the Group as of 31 December 2017 and 31 December 2016 are disclosed in Note 15.

F-163 56 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

38 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (CONTINUED)

The Group monitors liquidity on the basis of the net debt to EBITDA ratio, which was calculated as net debt divided by EBITDA. Net debt is calculated as total debt less cash and cash equivalents.

In accordance with the Group’s financial policy the Group shall maintain a net debt to EBITDA ratio of no higher than 2.5 and an EBITDA to interest accrued ratio of no lower than 7. This policy is stricter than the relevant contractual requirements. The net debt to EBITDA ratio was 1.64 and 2.01 as of 31 December 2017 and 2016, respectively. The EBITDA to interest accrued ratio was 10.6 and 6.4 for the years ended 31 December 2017 and 2016, respectively.

39 FAIR VALUE OF FINANCIAL INSTRUMENTS

Recurring fair value measurements

Swap agreements. In 2014-2015, the Group entered into several arrangements with Sberbank of Russia, Nordea Bank and Promsvyazbank. In accordance with those arrangements, the Group swaps principal amounts and interest payable in US dollars to Russian roubles at a fixed rate.

The Group recognized swap arrangements as derivatives at fair value through profit or loss determined based on Level 2 measurements. Fair value was calculated based on projected cash flows defined in accordance with the contractual terms, discounted at the risk-free rates denominated in the relevant currencies and converted at the prevailing spot currency exchange rate as at the reporting date.

In the first half of 2016, these agreements were settled. The Group recognized gain on derivative financial instruments in the amount of RR 104 as finance income in the consolidated statement of profit or loss as a result of the settlement.

Contingent consideration for the sale of OOO SIBUR-Portenergo. In November 2015, the Group recognized the contingent consideration in the amount of RR 698 as a financial asset classified as available for sale within non-current trade and other receivables in the consolidated statement of financial position as the part of the consideration from disposal of its subsidiary OOO SIBUR- Portenergo (see Note 4).

F-164 57 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

39 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Fair value of this financial instrument was determined using Level 3 measurements, as the sum of potential outcomes determined in the share purchase agreement weighted by the corresponding probability of each scenario. As of 31 December 2017 and 31 December 2016, the fair value of this contingent consideration was assessed as RR 736 and RR 719, respectively. The unwinding of discount in the amount of RR 54 and RR 54 was recognized as finance income in the consolidated statement of profit or loss for the years ended 31 December 2017 and 2016, respectively. A forex loss in the amount of RR 37 and RR 135 was recognized as finance expense in the consolidated statement of profit or loss for the years ended 31 December 2017 and 2016, respectively.

Contingent consideration for the purchase of OOO Tobolsk HPP. In February 2016, the Group recognized a contingent consideration in the amount of RR 585 as a financial liability within other non- current liabilities in the consolidated statement of financial position as a part of the total purchase consideration for the acquisition of its subsidiary OOO Tobolsk HPP (see Note 4).

The fair value of this financial instrument was determined using Level 3 measurements, as the sum of potential outcomes for different scenarios in which the Group realises synergies from integrating Tobolsk HPP into its production site infrastructure in Tobolsk, multiplied by the probability of each scenario. In 2017, the Company reassessed the probability of each scenario, and as a result, recognized loss of RR 1,045 in the result of subsidiary’s acquisition and remeasurement of related liabilities line of the consolidated statement of profit or loss. As of 31 December 2017 and 2016, the fair value of this contingent consideration was assessed as RR 1,818 and RR 666, respectively. Correspondingly, the unwinding of discount amounting to RR 107 and RR 81 was recognized as a financial expense in the consolidated statement of profit or loss for the year ended 31 December 2017 and 2016. b) Assets and liabilities not measured at fair value but for which fair value is disclosed

Liabilities carried at amortised cost. As of 31 December 2017 and 31 December 2016, the fair value of the Eurobonds 2018 (see Note 25) was RR 25,736 and RR 38,477, respectively. As of 31 December 2017, the fair value of the Eurobonds 2023 (see Note 25) was RR 28,945. It was calculated based on Level 1 measurements such as quoted market prices. The fair values of other long- term and short-term debt carried at amortised cost were determined using valuation techniques. The estimated fair value of variable interest rate instruments linked to LIBOR, EURIBOR, USA CPI or the Central Bank of Russia key interest rate with stated maturity was estimated based on Level 2 measurements as expected cash flows discounted at current LIBOR, EURIBOR, USA CPI or the Central Bank of Russia key interest rate increased by the margin stipulated by the corresponding loan agreement. The estimated fair value of fixed interest rate instruments with stated maturity was estimated based on Level 3 measurements as expected cash flows discounted at current interest rates for new instruments with similar credit risk and remaining maturity. As of 31 December 2017, the fair value of the Russian rouble bonds with maturity date 26 March 2021 (see Note 25) was RR 10,729. As of 31 December 2017 the fair value of Credit Agricole Loan (ECA financing) was RR 8,107. The carrying amounts of other long-term and short-term liabilities carried at amortised cost in the consolidated statement of financial position approximate their fair value.

40 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS

F-165 58 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

40 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS (CONTINUED)

The Russian economy was growing in 2017, after overcoming the economic recession of 2015 and 2016. The economy is negatively impacted by low oil prices, ongoing political tension in the region and international sanctions against certain Russian companies and individuals. The financial markets continue to be volatile.

In the year 2014, the USA and the EU imposed a number of sectorial and personal sanctions against some of Russian companies and Russian citizens. These sanctions restrict certain US and EU persons and companies from providing financing, goods and services to certain entities. The Group considers these sanctions in its activities, continuously monitors them and analyses the effect of the sanctions on the Group’s financial position and results of operations. As of 31 December 2017 the Group was not subject to economic sanctions and restrictions imposed by the USA and the EU.

Russia’s future economic development is dependent upon both external factors and government measures to sustain growth and change the tax, legal and regulatory environment. Management believes it is taking all necessary measures to support the sustainability and development of the Group’s business in the current business and economic environment. However, the future effects of the current economic situation are difficult to predict and management’s current expectations and estimates could differ from actual results.

Taxation. Russian tax, currency and customs legislation is subject to varying interpretations and frequent changes. The Group management’s interpretation of such legislation, as applied to the Group’s transactions and activity, may be challenged by the relevant federal and regional authorities.

The Russian tax authorities may take a more assertive position in their interpretation of the law and assessments, and it is possible that transactions and activities that have not been challenged in the past may now be challenged. As a result, significant additional taxes, penalties and interest may be assessed. Fiscal periods remain open to review by the authorities in respect of taxes for the three calendar years preceding the year under review. However, earlier periods also could be reviewed under certain conditions. According to the Group’s management as at 31 December 2017 their interpretation of relevant legislation is correct and the Group’s position will be stable from tax, currency and customs legislation standpoint.

The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development (OECD), although it has specific features. This legislation provides for the possibility of additional tax assessments for controlled transactions (transactions between related parties and certain transactions between unrelated parties) if such transactions are not on an arm’s-length basis. The Management has implemented internal controls to be in compliance with this transfer pricing legislation.

Tax liabilities arising from controlled transactions are determined based on their actual transaction prices. It is possible, with the evolution of the interpretation of the transfer pricing rules, that such transfer prices could be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group.

F-166 59 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

40 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS (CONTINUED)

The Group includes companies incorporated outside of Russia. The Group’s tax liabilities are determined on the assumption that these companies are not subject to Russian income tax, if they are not permanently established in Russia. Russian tax law does not provide detailed rules on the taxation of foreign companies. With the evolution of the interpretation of these rules and changes in the Russian tax authorities’ approach, it is possible that the non-taxable status of some or all of the Group’s foreign companies in Russia may be challenged. The impact of any such challenge cannot be reliably assessed; however, it may be significant to the financial condition and/or overall operations of the Group.

Russian tax legislation provides wide range of incentives related to specific types of taxable property, while, there is an uncertainty in classification criteria for assets eligible for such preferential taxation. Group management adopts its internal policy to classify assets subject to the beneficial tax treatment. With the evolution of the interpretation of these rules and changes in the Russian tax authorities’ approach, it is possible that the eligibility of such assets to be taxed beneficially may be challenged. The impact of any such challenge was assessed as not significant to the financial condition and/or overall operations of the Group.

The Group’s management believes that its interpretation of the relevant legislation is appropriate and that the Group’s tax, currency and customs positions will be sustained. Where the Group’s management believes it is probable that a position cannot be sustained, an appropriate amount has been accrued for in these consolidated financial statements.

Management believes that there are no likely liabilities for environmental damage, that would have a materially adverse impact on the Group’s financial position or operating results.

Operating lease commitments. Where the Group is a lessee in a lease that does not substantially transfer all risks and rewards incidental to ownership from the lessor to the Company, the total lease payments (as specified in a lease contract) are charged to profit or loss for the year on a straight-line basis over the lease term. The Company has two types of lease contracts in place: fixed-term agreements and continuous contracts. The vast majority of fixed-term contracts are non-cancellable before the expiry date and only a few of them may be terminated by the lessee at its sole discretion. The continuous contracts may be terminated by either party by giving proper notice of termination. The lease term is the non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee will exercise the option. Lease payments include payments for non-lease elements in the arrangement such as scheduled maintenance expenses, insurance expenses, pollution charges and related taxes. Payments for the non-lease elements are not specifically predetermined in the contracts and may vary depending on the level of servicing required. Accordingly, it would not be practicable to disclose them separately.

F-167 60 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

40 COMMITMENTS, CONTINGENCIES AND OPERATING RISKS (CONTINUED)

The Group’s operating lease commitments as of 31 December 2017 and 31 December 2016 were as follows:

31 December 2017 31 December 2016 Less than 1 year 10,254 8,642 From 1 year to 5 years 23,368 26,121 More than 5 years 1,218 2,742 Total operating lease commitments 34,839 37,505

The majority of the Group’s lease contracts are for rail cars and shipping vessels that the Group uses to transport its produced goods to customers. Related expenses are accounted as transportation and logistics within operating expenses in the consolidated statement of profit or loss.

As long as the Group has lease operations, there will be impact on the Group’s consolidated financial statements from adoption of the new standard IFRS 16 “Leases” that is effective for annual periods beginning on or after 1 January 2019. The Group is currently in the process of development of methodology for an accounting under the new standard. In accordance with the current estimates, which are still under discussion, in case the new accounting rules were effective since 01 January 2017 financial lease liability would approximate RR 40 billion as of 31 December 2017, also for the year ended 31 December 2017 EBITDA would approximate RR 173 billion.

Capital commitments. The Group has entered into contracts for the purchase of property, plant and equipment and construction services. As of 31 December 2017, the Group had contractual capital expenditure commitments of RR 182,913, including RR 174,855 related to the ZapSib (as of 31 December 2016: RR 218,308, including RR 213,703 related to the ZapSib), calculated as the contractual amount of construction contracts less cash paid under these contracts. The capital commitments should not be considered as binding since they can be cancelled on the sole management’s decision without any significant losses for the Group, except those liabilities, which were already recognized in the consolidated statement of financial position.

41 NEW ACCOUNTING DEVELOPMENTS

The following amended standards became effective from 1 January 2017, but did not have a material impact on the Group:

 Disclosure Initiative – Amendments to IAS 7 (issued on 29 January 2016 and effective for annual periods beginning on or after 1 January 2017). The new disclosures are included in Note 35.  Recognition of Deferred Tax Assets for Unrealised Losses – Amendment to IAS 12 (issued on 19 January 2016 and effective for annual periods beginning on or after 1 January 2017).  Amendments to IFRS 12 included in Annual Improvements to IFRSs 2014-2016 cycle (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2017).

42 NEW ACCOUNTING PRONOUNCEMENTS

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2018 or later, and which the Group has not early adopted.

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

F-168 61 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

42 NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

IFRS 9 “Financial Instruments: Classification and Measurement” (amended in July 2014 and effective for annual periods beginning on or after 1 January 2018). Key features of the new standard are:

 Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised cost, those to be measured subsequently at fair value through other comprehensive income (FVOCI) and those to be measured subsequently at fair value through profit or loss (FVPL).  Classification for debt instruments is driven by the entity’s business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement that are held in a portfolio where an entity both holds to collect assets’ cash flows and sells assets may be classified as FVOCI. Financial assets that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded derivatives are no longer separated from financial assets but will be included in assessing the SPPI condition.  Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are presented in profit or loss.  Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated at fair value through profit or loss in other comprehensive income.  IFRS 9 introduces a new model for the recognition of impairment losses – the expected credit losses (ECL) model. There is a ‘three stage’ approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that entities will have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables.  Hedge accounting requirements were amended to align accounting more closely with risk management. The standard provides entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all hedges because the standard currently does not address accounting for macro hedging.

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

F-169 62 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

42 NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

IFRS 16 “Leases” (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The Group is currently assessing the impact of this new standard on its consolidated financial statements (see Note 40).

Annual Improvements to IFRSs 2015-2017 cycle - amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on 12 December 2017 and effective for annual periods beginning on or after 1 January 2019). The narrow scope amendments impact four standards. IFRS 3 was clarified that an acquirer should remeasure its previously held interest in a joint operation when it obtains control of the business. Conversely, IFRS 11 now explicitly explains that the investor should not remeasure its previously held interest when it obtains joint control of a joint operation, similarly to the existing requirements when an associate becomes a joint venture and vice versa. The amended IAS 12 explains that an entity recognises all income tax consequences of dividends where it has recognised the transactions or events that generated the related distributable profits, eg in profit or loss or in other comprehensive income. It is now clear that this requirement applies in all circumstances as long as payments on financial instruments classified as equity are distributions of profits, and not only in cases when the tax consequences are a result of different tax rates for distributed and undistributed profits. The revised IAS 23 now includes explicit guidance that the borrowings obtained specifically for funding a specified asset are excluded from the pool of general borrowings costs eligible for capitalisation only until the specific asset is substantially complete.

F-170 63 PAO SIBUR HOLDING NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS

(In millions of Russian roubles, unless otherwise stated)

42 NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

The following other new pronouncements are not expected to have any material impact on the Group when adopted:

 IFRS 15 “Revenue from Contracts with Customers” (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2018). Amendments to IFRS 15, Revenue from Contracts with Customers (issued on 12 April 2016 and effective for annual periods beginning on or after 1 January 2018).  Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB).  Amendments to IFRS 2 “Share-based Payment” (issued on 20 June 2016 and effective for annual periods beginning on or after 1 January 2018).  Applying IFRS 9 “Financial Instruments” with IFRS 4 “Insurance Contracts” – Amendments to IFRS 4 (issued on 12 September 2016 and effective, depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption option, or when the entity first applies IFRS 9 for entities that choose to apply the overlay approach).  Transfers of Investment Property – Amendments to IAS 40 (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018).  Annual Improvements to IFRSs 2014-2016 cycle – Amendments to IFRS 1 and IAS 28 (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018).  Prepayment Features with Negative Compensation – Amendments to IFRS 9 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019).  Long-term Interests in Associates and Joint Ventures – Amendments to IAS 28 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019).  IFRIC 22 "Foreign currency transactions and advance consideration” (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018).

CONTACT INFO

The Group’s Head Office:

PAO SIBUR Holding 16/1 Krzhizhanovskogo St. Moscow, GSP-7, 117997 Russia Tel./fax: +7 (495) 777 5500 Website: www.sibur.ru (Russian) www.sibur.com (English)

F-171 64

ISSUER GUARANTOR

SIBUR Securities DAC PJSC "SIBUR Holding" 10 Earlsfort Terrace 16/1 Krzhizhanovskogo Street

Dublin 2 Moscow, 117997 Ireland Russian Federation

JOINT LEAD MANAGERS AND BOOKRUNNERS

Bank GPB International S.A. Goldman Sachs International (Gazprombank) Plumtree Court 15, rue Bender 25 Shoe Lane L-1229 London EC4A 4AU Luxembourg United Kingdom J.P. Morgan Securities plc Sberbank CIB (UK) Limited 25 Bank Street Canary Wharf 85 Fleet Street London E14 5JP London, EC4Y 1AE United Kingdom United Kingdom

JOINT LEAD MANAGER

Banca IMI S.p.A, acting through its London Branch 90 Queen Street EC4N 1SA London United Kingdom PRINCIPAL PAYING AGENT TRUSTEE REGISTRAR AND TRANSFER AGENT Citibank, N.A., Citibank, N.A., Citigroup Global Markets London Branch London Branch Europe AG Citigroup Centre Canada Square Citigroup Centre Canada Square Reuterweg 16 London E14 5LB London E14 5LB 60323 Frankfurt United Kingdom United Kingdom Germany

LEGAL ADVISERS TO THE ISSUER

as to U.S. Federal law and as to Irish law as to Russian law English law Clifford Chance LLP Arthur Cox Clifford Chance CIS Limited 10 Upper Bank St. 10 Earlsfort Terrace ul. Gasheka, 6 London E14 5JJ Dublin 2 125047 Moscow United Kingdom Ireland Russian Federation LEGAL ADVISERS TO JOINT LEAD MANAGERS AND LEGAL ADVISERS TO

BOOKRUNNERS TRUSTEE as to U.S. Federal law and as to Russian law as to English law English law Linklaters LLP Linklaters CIS Linklaters LLP One Silk Street Paveletskaya Square 2/2 One Silk Street London EC2Y 8HQ Moscow 115054 London EC2Y 8HQ United Kingdom Russian Federation United Kingdom

INDEPENDENT AUDITORS

AO PricewaterhouseCoopers Audit Butyrsky Val 10, 125047 Moscow Russian Federation