Legal risks associated with the Company’s operations (separately for domestic and international markets)

In the foreseeable future, the Company regards the risks associated with changes in currency, tax, customs and licensing legislation, which may entail a deterioration in the financial condition of the Company, as insignificant. In doing business, the Company relies on the strict compliance with tax, customs, currency, and licensing legislation, monitors and timely responds to relevant changes, and also seeks constructive dialogue with regulatory authorities when it comes to law enforcement practice.

Risks related to changes in exchange regulations

Domestic market: the risks associated with the possibility of changes in exchange regulation are currently considered by the Company as minimal. The Company believes they will not have a significant impact on its operations.

Foreign market: legal risks associated with the Company’s activities in the foreign market are minimal, as the Company carries on its core business in the domestic market. However, in the case fixed assets were purchased from foreign counterparties in foreign currency, the Company would be exposed to the risks of changes in the foreign exchange laws of foreign countries. In this case, it will take all necessary measures to do its business in full accordance with the laws governing international trade. Due to the growing international tension and the possible introduction of a new package of sanctions against the Russian Federation by the United States and the European Union, the Company assesses the risk of tightening currency regulation as medium.

Risks associated with changes in tax laws

Domestic market: the legal risks associated with changes in the taxation system are essential for the Company. The reform of the tax system is accompanied by changes in legislation, law enforcement and judicial practice. In this regard, there are potential sources of financial losses for the Company arising from the application of various fines and tax payments in amounts greater than expected. The Company fully complies with applicable tax laws, which however does not eliminate the potential risk of differences of opinions with relevant regulatory authorities on issues that may be ambiguous. In general, tax risks associated with the Company’s operations are characteristic of most business entities operating in the territory of the Russian Federation and can be considered as nationwide. The Tax Code of the Russian Federation provides against the retrospective application of laws that worsen the position of a taxpayer. in view of the aforesaid, this risk is assessed by the Company as insignificant.

Foreign market: the Company considers the risks associated with changes in tax laws in the foreign market as minimal, since the Company is a resident of the Russian Federation, which, in turn, has a comprehensive line of double taxation avoidance agreements for its residents. Due to this, the Company can regard these risks as minimal.

Should any changes be made to applicable taxation rules and procedure, the Company will intend to plan and carry out its financial and business activities with due regard of such changes.

Risks associated with changes in customs control regulations and duties

Changing the customs control regulations and duties may have a negative impact on the Company’s operations both in the domestic and foreign markets. Nevertheless, Russia’s entry into the WTO can be regarded as an advantage for the Company’s business, since the binding of customs tariffs will limit the Company from the risk of cost-plus inflation due to the introduction of higher customs duties.

Risks associated with changes in licensing requirements for the core business of the Company or licensing of rights to use objects with limited turnover (including natural resources)

Domestic market: The Company carries out non-licensable activities. However, in the case of the adoption of regulatory acts establishing the obligation to license those types of activities carried out by the Company, it will act within the limits of the law. The Company undertakes to fulfils all the requirements necessary to obtain licenses or extend their term. The possibility of changing the requirements for licensing the core business of the Company is considered as unlikely. Subject to changes in the requirements for licensing the activities of the Company or licensing the rights to use objects with limited turnover, the Company will take the necessary measures to obtain the appropriate licenses and permits. Risks associated with changes in legislation or decisions of federal or local authorities on licensing issues are beyond the control of the Company, and it cannot guarantee that in the future there will be no changes of this kind that could adversely affect its activities. However, the risk of changes to the licensing legislation is considered to be insignificant.

Foreign market: The Company does not carry out activities required to be licensed on the foreign market, and therefore this risk is regarded as minimal. In the event of a change in licensing requirements for the core business of the Company, it will act in accordance with the new requirements, including obtaining the necessary licenses.

Risks associated with changes in judicial practice on issues of the Company’s activities (including licensing), which may adversely affect the results of its activities, as well as on the results of ongoing lawsuits the Company is involved in

Domestic market: risks associated with changes in judicial practice are present and may subsequently negatively affect the Company’s performance. At the end of the reporting period, the Company does not participate in litigations, which can lead to significant costs and adversely affect its financial condition. The Company cannot entirely rule out the possibility of participating in litigations that could affect its financial condition in the future. However, the Company has all the means of legal protection of interests, which allows assessing this risk as minimal.

Foreign market: risks associated with changes in judicial practice are present and may subsequently negatively affect the Company’s performance. At the end of the reporting quarter, the Company does not participate in litigations, which can lead to significant costs and adversely affect its financial condition. The Company cannot entirely rule out the possibility of participating in litigations that could affect its financial condition in the future. Moreover, the Company is on an equal footing with other market participants and has all the means of legal protection of interests, which allow assessing this risk as minimal.

Risk of losing reputational capital (reputational risk)

The Risk of losing reputational capital (reputational risk) implies possible losses resulting from a decrease in the number of customers (contractors) due to the formation of a negative image of the financial stability, financial position of the Company, the quality of its products (work, services) or the nature of its activities in general.

In order to reduce reputational risk, the Company pursues an Information Policy on the formation of a favourable image: publishing press releases, conducting presentation events, participation of subject matter experts in industry conferences, disseminating information on social networks on the Internet, inviting representatives of the investment community to various image-building events, etc.

To prevent the spread of negative information about the financial situation and financial stability, the Company regularly posts accounting (financial) statements and information about net assets on the Internet.

In order to ensure effective management of the reputational risk, the management bodies of the Company take timely measures to eliminate violations in the business operations. The Company also has established a procedure for submitting internal reports on responses to feedback from the media, customers and counterparties, shareholders and other persons about the issuer, affiliates, subsidiaries, and related entity.

In general, the Company estimates reputational risks as insignificant.