Delivery of Instructions and Directives of the President and the Government of the Russian Federation

Subclause j, clause 1 of the Instruction of the President of the Russian Federation No. Pr-3668 of December 06, 2011.

Subclause c, clause 2 of the Decree of the President of the Russian Federation On the Long-Term State Economic Policy No. 596 of May 07, 2012.

The Instruction of the First Deputy Chairman of the Government of the Russian Federation, I.I. Shuvalov No. ISH-P13-6768 of November 13, 2012.

Rosneft is continuously performing optimization of assets owned by the Company, its subsidiaries and affiliates.

Non-Core and Tail Assets Divestment Program was developed and is being consistently implemented in the Company in line with the Corporate Property Management Policy and the Standard for Non-Core and Tail Assets Divestment, developed in the Company and approved by the Board of Directors, as well as with the resolutions of management bodies.

Execution of the Company’s Non-Core Assets Divestment Program is supervised by the Rosneft Board of Directors. The scheduled review of this issue took place on May 12, 2015 (Minutes 33) and the respective analysis of the execution track record was approved.

The Company reports on the execution of non-core assets divestment to Rosimushchestvo and the Ministry of Economic Development on a regular basis (letters No. LK-4195 of May 26; LK-6339 of July 17, 2015; LK-6966 of July 28, 2015;
No. LK-11817 of October 12, 2015).

The Standard sets the key principles for non-core and tail assets management and the relevant procedures, stages and deadlines for their implementation.

The Company annually classifies the relevant assets as non-core or tail, and performs their appraisal, technical audit and economic and legal expert analysis.

During the reporting year the Company performed the following:

1. disposal of shares (stocks) in 8 Group companies and other Rosneft business entities;
2. sales of 5 wells at Kolvinskoye field belonging to the Company but located in the license areas of third parties;
3. update of the list of fixed assets not used by the Company (672 facilities including idle pipelines and power transmission lines due to the production completion; complex facilities required by a limited group of purchasers, tank farms, fuel stations, wells in the license areas of third parties; civil facilities (apartments, residential buildings, hotels, resort centers)). Preparation of assets for divestment;
4. liquidation of 25 Group companies (including 5 foreign companies, for the purpose of deoffshorization among the rest).

Sales of shares (stocks) in 31 companies and liquidation of 98 companies of the Group and other Rosneft business entities (including 37 foreign companies) as well as sales of some other non-core assets are to be performed in 2016 - 2019.

Cash funds received from implementation of the non-core and tail assets divestment program shall contribute to the Company investment program performance and implementation of its strategic objectives.

On May 12, 2015 the Company Board of Directors approved the Analysis of Rosneft Non-Core Asset Divestment Program as of January 01, 2015 in accordance with Rosimushchestvo letter No. OD-11/15898, of April 22.04.2015, On Performance of the Decree of the President of the Russian Federation No. 596 as of May 07, 2012, approved the analysis of the Rosneft non-core assets divestment program as of January 01, 2015.

Zhemchuzhina Sibiri, CJSC

1170

91.1 Revenue from selling investments in other entities

91.2 Cost of investments in other entities

10,794.5

15,000.1

4,205.6

Shares sold at the negotiated price

Transneft-Terminal, LLC

1170

91.1 Revenue from selling investments in associated companies

91.2 Cost of investments in associated companies

250.0

105,500.1

105,250.0

Shares sold at the negotiated price

Okhabank, LLC

RN: 1170

VBRR: 1150

RN: 91.1 Revenue from selling investments in associated companies

91.2 Cost of investments in associated companies

VBRR: 91.1 Revenue from selling investments in subsidiaries

91.2 Cost of investments in subsidiaries

63,642.7

178,464.0

114,821.3

Shares sold at the negotiated price

Kolek-Eganneft, CJSC

1170

NNP: 9101061100 Revenue from selling shares

9111062100 Book value of shares

Nizhnevartovskneft: 91.1 Revenue from selling investments to other entities

91.2 Cost of investments in other entities

46.5

46.5

Chernomorneftegaz, CJSC

1170

91.1 Revenue from selling investments in other entities

91.2 Cost of investments in other entities

5.0

5.0

YUM-Estate, LLC

1170

91.1 Revenue from selling investments in subsidiaries

91.2 Cost of investments in subsidiaries

800,321.6

2,170,000.0

1,369,678.4

Asset divestment at market price determined by independent appraiser

Energoneft-Tomsk, LLS

1170

91.1 Revenue from selling investments in subsidiaries

91.2 Cost of investments in subsidiaries

10.0

45,000.0

44,990.0

Asset divestment at market price determined by independent appraiser

AIKB, CJSC Yenisei United Bank

1170

9101130200 Revenue from other non-marketable long-term securities

9110130202 Cost of other non-marketable long-term securities

1311.6

1,000.0

-311.6

Asset divestment at market price determined by independent appraiser

Well No.4, purpose: prospecting

12000159

1150

9101030100 Revenue from selling fixed assets (w/o VAT); 9110030200 Remaining book value of fixed assets sold

3,732

19,876/2

16,144.2

Asset divestment at market price determined by independent appraiser

Well No.11, purpose: prospecting

12000160

1150

9101030100 Revenue from selling fixed assets (w/o VAT); 9110030200 Remaining book value of fixed assets sold

3,732

11,880.4

8,148.4

Asset divestment at market price determined by independent appraiser

Well No.20, purpose: prospecting

12000161

1150

9101030100 Revenue from selling fixed assets (w/o VAT); 9110030200 Remaining book value of fixed assets sold

3,732

20,113.0

16,381.0

Asset divestment at market price determined by independent appraiser

Well No.62, purpose: prospecting

12000162

1150

9101030100 Revenue from selling fixed assets (w/o VAT); 9110030200 Remaining book value of fixed assets sold

3,732

25,479.1

21,747.1

Asset divestment at market price determined by independent appraiser

Well No.64, purpose: exploration

12000163

1150

9101030100 Revenue from selling fixed assets (w/o VAT); 9110030200 Remaining book value of fixed assets sold

3,732

22,651.2

18,919.2

Asset divestment at market price determined by independent appraiser

Total

895,042.0

2,615,015.6

1,719,973.6

2.1. APPROVAL OF THE PROCUREMENT REGULATION. PROCUREMENT TRANSPARENCY IMPROVEMENT.

Federal Law No.223-FZ, On Procurement of Goods, Works and Services by Specific Legal Entities.

Instruction of the Government of the Russian Federation No. ISH-P13-8685 of December 17, 2012.

On April 03, 2015 The Rosneft Board of Directors approved a new version of the corporate Provision on Procurement of Goods, Works and Services (for the text see official website of the Company or the Integrated Information System (http://zakupki.gov.ru), that:

• sets the corporate procurement principles: information transparency and availability, equality, justice, non-discrimination, no unwarranted restrictions of competition among procurement participants, target and cost-efficient expenditure of funds, prevention of corruption or any other abuse in process of procurement operations;
• specifies the key stages of works, goods and services procurement, including the procedures for preparation and performance of procurement and the relevant contracts signing and performance;
• indicates the provisions for small and medium business entities involvement in the procurement;
• offers the option of performing online procurement.

2.2. PROVISION OF PROCUREMENT EFFICIENCY FROM SMALL AND MEDIUM BUSINESS ENTITIES, INCLUDING PROCUREMENT OF INNOVATIONS AND HIGH-TECH PRODUCTS.

Decree of the Government of the Russian Federation
No. 867-r of May 29, 2015.

Directives of the Government of the Russian Federation No. 6362p-P13 of October 24, 2013 and No. 7377p-P13 of October 07, 2013.

On January 22, 2014 the Rosneft Board of Directors reviewed the solutions for expanding the access of small and medium business entities to Rosneft procurement in order.to perform the Directives of the Government of the Russian Federation No.6362p-P13 of October 24, 2013 and No. 7377p-P13 of October 07, 2013.

During the reporting year the Company held comprehensive events to increase the efficiency of procurement operations, including:

• establishment and continuous activity of Advisory Council, information on the council activities is posted on the Rosneft corporate website (http://zakupki.rosneft.ru/consult);
• development and approval of internal documents as follows:
  • The Company Regulation on Procurement of Goods, Works and Services (new version);
  • Rosneft Regulation on the Advisory Council activities including social audit of procurement efficiency from small and medium business entities;
  • The Company Regulation on operation procedure for a single contact system, established to implement innovative products;
  • The Company classification principles for the Objects of Innovative Activities, stating uniform regulations and criteria for classifying the Company goods, works and services as innovations according to the Order of the Ministry of Industry and Trade of the Russian Federation No. 1618 of November 01, 2012;
  • The Company Guidelines on the Products Life Cycle Assessment, stating the procedure for application of "product life cycle cost" assessment criterion.
• amendment of the Company local regulations in terms of specifying the details of small and medium business entities involvement in procurement procedures of the Company;
• collection of innovative solutions proposed by the potential contractors including small and medium business entities, via one contact point on the Rosneft website (http://www.rosneft.ru/science_and_innovation/);
• development and approval of 2016-2020 Innovative Products Procurement Plan (posted in the Integrated Information System (http://zakupki.gov.ru);
• approval and introduction of KPI for the Company top managers as follows (1) procurement share of small and medium business entities (in 2015 procurement share of small and medium business entities made 28.5 % (RUB 13.5 bn) of RUB 47.4 bn estimates base), (2) innovative development and admission of small and medium business entities;
• initiation of 3399 procurements by the Company in 2015 totaling to RUB 652 bn in order to increase the quantity of online procurement procedures using Tektorg e-trading facility (Rosneft section). 6247 suppliers are registered on Tektorg (Rosneft section). In 2016 100 % of competitive procurements are to be transferred to e-trading facilities.

2.3. GROWING PROCUREMENTS OF RUSSIAN-MANUFACTURED PRODUCTS.

Instructions of the President of the Russian Federation upon the presidium meeting of the State Council of the Russian Federation of February 20, 2009.

Subclause 4, clause. 1 of the list of instructions of the President of the Russian Federation No. Pr-2821 of December 05, 2014, Instruction of the Government of the Russian Federation No. AD-P9-9176 of December 08, 2014, Directives of the Government of the Russian Federation
No. 1346p-P13 of March 05, 2015.

Directives of the Government of the Russian Federation
No. 3425p-P13 of June 01, 2015.

The Company Board of Directors developed and approved the strategies (list of events) for the scheduled step-by-step replacement of foreign products (works or services) procurement with the Russian equivalents in terms of technical standards and application properties, applied in performing investment projects and current business operations according to the principles of economic and process feasibility (Minutes No. 35 of June 05, 2015).

The above events, their performance indicators as well as the steps to facilitate involvement of the small and medium business entities are included in the updated Rosneft Long-Term Development Program approved by the Rosneft Board of Directors on December 18, 2015.

Section 15.1 of the Company Regulation on Procurement of Goods, Works and Services, Priority of Russian goods as well as works and services performed by citizens of the Russian Federation, specifications of the small and medium business entities involvement into procurement procedures, provides for:

• priority of Russian goods as well as works and services performed by citizens of the Russian Federation in the cases and according to the procedures set by the effective legislation;
• the customer's right to apply the relevant priorities and specifications, if directly indicated in procurement documents, or if the relevant standards were directly stipulated by the effective legislation. In addition, the Program of import substitution and localization of foreign equipment manufacturing on the territory of the Russian Federation for both medium-term and long-term perspective till 2025 was developed and is being implemented in the Company.

The Company Regulation on Procurement of Goods, Works and Services fully meets the requirements of the Directives of the Government of the Russian Federation No. 3425p-P13 as of June 01, 2015 and allows the Company to sign long-term agreements for supply of any products including coal products.

Decree of the Government of the Russian Federation No. 774-r of June 29, 2006 (as revised by the Decree of the Russian Federation No. 2083-r of November 12, 2012).

According to the Dividend Policy approved by the Board of Directors, determining the amount of dividends recommended to the General Shareholders Meeting, the Board of Directors shall take into account the amount of net income on the basis of the Rosneft financial statements (under RAS) and on the basis of the Rosneft consolidated financial statements (under IFRS).

Recommended dividend amount shall be determined by the Rosneft Board of Directors according to the annual financial results of Rosneft business operations and, as a rule, amounts to at least 25 % of the Rosneft net income under IFRS.

Rosneft was the first state-owned company to pay dividends in the amount of at least 25 % of its net income.

Since 2011 Rosneft has been allocating 25 % of its net income under IFRS for payment of dividends.

In full compliance with Rosneft dividend policy the General Shareholders Meeting on June 17, 2015 resolved to pay dividends in the amount of 25 % of Rosneft’s net income for 2014 under IFRS. Thus, Rosneft’s net income was distributed as follows:

• net income RUB 501,324.3 mln;
• dividend payment RUB 87,011.0 mln;
• investments, operational and social development of Rosneft RUB 414,313.3 mln.

Resolution of the Government of the Russian Federation No. 1214, On Improvement of Management Procedure for Open Joint Stock Companies in federal ownership and Federal State Unitary Enterprises, of December 31, 2010.

Directives of the Government of the Russian Federation No. 2007p-P13 of April 06, 2015.

Paragraph 2 of minutes of the meeting called by the First Deputy Chairman of the Government of the Russian Federation, I.I. Shuvalov No. ISH-P13-47pr of June 02, 2015.

Directives of the Government of the Russian Federation No. 5024p-P13 July 31, 2015.

Rosneft 2015 Annual Report is developed according to the requirements to annual reporting of the Regulation of the Bank of Russia No. 454-P of December 30, 2014, taking into account sample structure of an annual report of a joint stock company in federal ownership, approved by the Resolution of the Government of the Russian Federation No. 1214 of December 31, 2010 (as revised by the Government Resolution No. 1211 of November 10, 2015) and the requirements of the Directives of the Government of the Russian Federation No. 2007p-P13 of April 06, 2015 and No. 5024-P13 of July 31, 2015.

5.1. DEVELOPMENT AND APPROVAL OF INNOVATIVE DEVELOPMENT PROGRAMS..

Clause b, paragraph 1 of the List of Instructions of the President of the Russian Federation No. Pr-307 of February 07, 2011, Directive of the Government of the Russian Federation No. 1221p-P13 of March 24, 2011.

Address to the Federal Assembly of the Russian Federation as of Novmber 12, 2010.

Meeting minutes of the Government Commission for Advanced Technology and Innovation No. 1 of January 30, 2012.

List of Instructions of the President of the Russian Federation No. Pr-3086 of December 27, 2013, Reference to the materials of the RF Government Meeting as of January 30, 2014, minutes No.3.

According to subclause b, clause 1 of the List of Instructions of the President of the Russian Federation No. Pr-307 of February 07, 2011, Directives of the Government of the Russian Federation No. 1221p-P13 of March 24, 2011, the Rosneft Innovative Development Program was approved by resolution of the Rosneft Board of Directors as of April 01, 2011.

The Program structure meets the requirements to innovative development programs of state-owned joint stock companies, state corporations and federal state unitary enterprises in accordance with recommendations approved by resolution of the Government Commission for Advanced Technology and Innovation.

The key guidelines, KPI and the events of the Innovative Development Program are integrated into the Rosneft Long-Term Development program approved by resolution of the Rosneft Board of Directors on December 18, 2015. The list of KPI of the Long-Term Development Program includes integrated KPI of innovative activities.

5.2. DEVELOPMENT AND APPROVAL OF THE INVESTMENT PROGRAM.

List of Instructions of the President of the Russian Federation No. Pr-3086 of December 27, 2013, Reference to the materials of the RF Government Meeting as of January 30, 2014, Minutes No.3.

2016-2017 Investment Program is approved by the Rosneft Board of Directors within the Rosneft Business Plan on December 18, 2015.

5.3. DEVELOPMENT AND APPROVAL OF THE JOINT-STOCK COMPANY STRATEGY AND THE LONG-TERM DEVELOPMENT PROGRAM.

Recommendations on development of innovative development programs approved by the decision of the the Government Commission for Advanced Technology and Innovation of August 03, 2010, Minutes 4.

Par. 2, clause 2 of Minutes of the meeting called by the First Deputy Chairman of the Government of the Russian Federation, I.I. Shuvalov No. ISH-P13-98pr of October 03, 2013.

Subclauses 32 and 34, clause 1, of the Instruction of the President of the Russian Federation No. Pr-3086 of December 27, 2013, Instruction of the Government of the Russian Federation No. DM-P13-9589 of December 30, 2013

Directives of the Government of the Russian Federation
No. 4955p-P13 of July 17, 2014.

Directives of the Government of the Russian Federation
No. 3984p-P13 of June 24, 2015.

Key events 6.2.-6.4. of the Action Plan for improving labor efficiency, approved by the Directive of the Government of the Russian Federation No. 1250-r of July 09, 2014 and the Directives of the Government of the Russian Federation
No. 7389p-P13 of October 31, 2014.

Paragraph 2.3. of section I of meeting Minutes No. 4 of the Military and Industrial Commission under the Government of the Russian Federation of April 25, 2014.

Directives of the Government of the Russian Federation
No. 3666p-P13 of June 11, 2015.

Subclause B, clause. 2 of the Instruction of the President of the Russian Federation No. Pr-1627 of July 01, 2014, Instruction of the Government of the Russian Federation No. ISH-P8-6196 of August 15, 2014 and No.OG-P8-5496 of July 22, 2014, the Directives of the Government of the Russian Federation No. 7439p-P13 of November 5, 2014.

The Instruction of the Chairman of the Government of the Russian Federation, D.A. Medvedev No.DM-P36-7661 of November 12, 2015 .

The following Rosneft documents were approved by resolution of the Rosneft Board of Directors of December 09, 2014: Development Strategy by 2030, Long-Term Development Program, Standard for Audit Inspection of the Rosneft Long-term Development Program Implementation and the Company Provision on the Company Performance Indicators.

The Rosneft Strategy and Long-Term Development Program set strategic objectives for the Company development and the list of events held to achieve the above objectives (in terms of operations, investment and finance, management, HR).

Strategy among the rest includes:

• a list of KPI and their target values;
• development strategy of investment and financial functions in Rosneft;
• forecast for scientific and technical development, upgrading and improvement of the applied technologies;
• strategy for energy saving and energy efficiency.

The Company strategic development objectives are available on the Rosneft corporate website: http://www.rosneft.ru/news/pressrelease/09122014.html.

The Company internal policies for certain business streams, including Innovative Development Program, Energy Saving Program, Investment Program and other documents were taken into account for development of the Long-Term Development Program.

From 2015 the Company issues an annual report on the Long-Term Development Program implementation for the previous period and performs an independent audit of its performance. The Company selected an independent expert entity - LLC Ernst and Young, approved by the Audit Committee under the Rosneft Board of Directors, to perform the first annual audit of the Long-Term Development Program implementation in 2014. The audit results were reviewed by the Rosneft Board of Directors on June 05, 2015 and submitted at the Annual General Shareholders Meeting on results of 2014.

The Long-Term Development Program is annually updated on the basis of the audit results. Directives of the Government of the Russian Federation regarding the Long-Term Development Program, additionally communicated to the Company, shall be executed and included in the Program update cycle. Thus, to perform the Directives of the Government of the Russian Federation No. 4955p-P13 of July 17, 2014, No. 7558p-P13 of November 12, 2014, No.1346p-P13 of March 05, 2015, No. 2303p-P13 of April 16, 2015 and to improve the quality of planning, on December 18, 2015 the Board f Directors approved the updated Long-Term Development Program containing the following arrangements approved by the Board of Directors on December 09, 2104 and June 05, 2015:

• strategies for improving efficiency and transparency of operations including the activities on operating costs reduction by 2-3 % p.a.;
• strategies for import substitution of products (works and services) procurement;
• strategies for raising labor productivity as well as the Company labor productivity targets.

The list of KPI of the Company top managers for 2016 includes labor productivity indicators in accordance with the approved Business Plan of the Company.

Efficiency improvement indicators, aimed at lean manufacturing, are an integral part of the current KPI system for the top managers and the heads of structural divisions of the Company.

The labor contract of the Rosneft President includes the obligation to ensure performance of the approved Strategy and Long-Term Development Program of the Company.

Intermediate results of the Long-Term Development Program implementation in 2015 were reviewed by the Rosneft Board of Directors at the meeting in presentia held on December 18, 2015.

Reports of the Long-Term Development Program performance shall be annually submitted to the General Shareholders Meeting.

5.4. DEVELOPMENT AND APPROVAL OF INTERNAL REGULATIONS COVERING THE COMPANY OPERATIONS.

Instruction of the President of the Russian Federation
No. Pr-3013 of December 27, 2014.

Instructions of the Government of the Russian Federation No.ISH-P13-1818 of March 23, 2015 and No. ISH-P13-4148 of June 24, 2015.

Directives of the Government of the Russian Federation
No. 3984p-P13 of June 24, 2015.

According to the guidelines, approved by the Government of the Russian Federation (No. ISH-P13-4148 of June 24, 2015), the following Company documents have been developed, approved and put into effect:

• The Company Policy on Internal Audit;
• The Company Policy on Operating and Investment Efficiency Improvement;
• The Company Policy on Risk Management and Internal Control System;
• The Company Policy on Onshore Oil Production;
• The Company Policy on Offshore Hydrocarbons Exploration and Production;
• The Company Policy on Gas Business;
• The Company Standard for the Corporate Risk Management System;
• The Company Regulation on the procedure for development (amendment) and performance of the Rosneft Innovative Development Program;
• The Company Regulation on operation procedure for a single contact system, established to implement innovative products;
• The Company Standard for Innovative Activities Efficiency Management;
• The Company Standard for the Corporate Scientific and Project Complex Quality Management System. Quality Manual;
• Regulation on Oil Products Quality Management System.

The Directives were implemented in full by Rosneft. The Directive Performance Report was submitted to Rosimushchestvo on November 30, 2015 and January 13, 2016.

5.5. IMPROVEMENT OF INTEGRATED STRUCTURES ACTIVITIES.

Paragraph 4 of minutes of the meeting called by the Deputy Chairman of the Government of the Russian Federation, D.O Rogozin No. RD-P13-45pr of June 15, 2012.

Paragraph 1 of the Instruction of the President of the Russian Federation No. Pr-1032 of May 07, 2014, Instruction of the Government of the Russian Federation No. ISH-P13-3464 of May 13, 2014, Instruction of the President of the Russian Federation No. Pr-2821 of December 05, 2014.

Directives of the Government of the Russian Federation No. 5110p-P13 of August 08, 2014 and No. 1796p-P13 of March 26, 2015.

Maintenance of activities and annual analysis of establishment of the United Treasury for the Company, its subsidiaries and affiliates.

Centralization of treasury functions of the Rosneft Group companies was implemented in 2005 by establishing the United Treasury on the basis of the Company Financial Service and the corporate bank JSC VBRR.

Current business processes and corporate treasury systems are approved by the Ministry of Finance of the Russian Federation.

Business processes for liquidity management, budgeting and acceptance of financial operations of the Group companies are stated in the relevant policies and internal regulations of the Company.

5.6. INTEGRATION OF RECOMMENDATIONS OF THE CORPORATE GOVERNANCE CODE OF THE BANK OF RUSSIA INTO THE COMPANY OPERATIONS.

Instruction of the Government of the Russian Federation No. DM-P36-46pr of August, 28, 2014.

Instruction of the Government of the Russian Federation No. ISH-P13-5859 of July 31, 2014.

Directives of the Government of the Russian Federation
No. 5667p-P13 of September 02, 2014.

Directives of the Government of the Russian Federation
No. 989p-P13 of February 20, 2015.

Upon analysis of the Rosneft corporate governance standards and the provisions of Corporate Governance Code of the Bank of Russia, Action Plan for integration of key Code provisions was developed in the Company and approved by the BoD resolution as of February 27, 2015. In 2015, the Company consistently worked on the plan implementation.

On June 11, 2015 the Board of Directors approved the Rosneft Corporate Governance Code (substituting the 2006 Corporate Conduct Code), regulating the key principles of the Rosneft corporate governance system, which complies with international best standards.

Information on observing the principles and recommendations of the Corporate Governance Code of the Bank of Russia, including the list of recommendations not covered by internal documents of the Company and comments explaining impossibility to apply the relevant recommendations to the Company, as well as description of alternative mechanisms and tools of corporate governance are included in the Company Annual Report.

5.7. INCLUSION OF THE RESERVATION ON THE POSSIBILITY TO PERFORM SETTLEMENTS IN RUBLES INTO NEW EXPORT CONTRACTS.

Subclause 1, clause 1, section I of meeting minutes of the National Council on Financial Solvency Provision No. 7 of April 10, 2015 and the Directive of the Government of the Russian Federation No. 4807p-P13 of July 23, 2015.

Today most of the oil products sales agreements of the Group companies signed with the CIS contractors provide an option to perform settlement in rubles.

Work on including a clause on settlements in rubles in agreements signed with foreign contractors is carried out along with risk assessment of clients loss and sales reduction (clients walkout due to extra forex expenses),as well as risks related to the Russian ruble devaluation that may lead to decreased revenue from oil products export sales.

5.8. ENSURING ENERGY EFFICIENCY OF THE COMPANY.

Instruction of the Government of the Russian Federation of June 19, 2008.

Federal Law No. 261-FZ, On Energy Saving and Energy Efficiency: part 2, art. 15, ch. 4, art. 25 ch.7.

Order of the Ministry of Energy of the Russian Federation No. 182 of April 19, 2010.

The Rosneft five-year Energy Efficiency Program was developed and is being annually updated in the Company. At present the Group companies implement the Rosneft Energy Efficiency Program for 2016 - 2020, approved by the Rosneft Board of Directors as of December 18, 2015.

5.9. ENSURING ENVIRONMENTAL RESPONSIBILITY MECHANISMS OF THE COMPANY.

Subclause "k", clause. 1 of the list of Instructions of the President of the Russian Federation No. Pr-1640 of June 06, 2010.

On August 07, 2012 the Rosneft Board of Directors approved the Procedure for Applying Voluntary Mechanisms of Environmental Responsibility and Obligatory Regular Publication of Non-Financial Reports on Rosneft Sustainable Development.

Rosneft has a corporate system of optional liability insurance. The Company applies insurance of optional liability for environmental damage as a risk management tool, allowing transfer of financial losses from insurable risks realization to insurance agencies. The current comprehensive liability insurance program for 2014-2016, including the section concerning liability for environmental damage, protects the interests of Rosneft, its subsidiaries, affiliates and/or associated companies in terms of potential liability arising from current and future operations across the whole scope of the Company activities.

6.1. ENSURING TRANSPARENCY OF THE COMPANY FINANCIAL AND BUSINESS ACTIVITIES.

Instructions of the Government of the Russian Federation No. VP-P13-9308 of December 28, 2011, No.IS-P13-80 of January 12, 2012, No. IS-P13-127 of January 13, 2012,
No. VP-P24-1269 of March 05, 2012.

Article 92 of Federal Law No. 208-FZ, On Joint Stock Companies, as of December 26, 1995.

Chapter VIII of Order of FFMS of Russia No.11-46/pz-n, On Approval of the Provision on Information Disclosure by Equity Securities Issuers, as of October 04, 2011.

Order of the Ministry of Economic Development of the Russian Federation No. 208, On Approval of Information Disclosure Procedure for for Joint Stock Companies in federal (municipal) ownership and Federal State (Municipal) Unitary Enterprises, as of May 11, 2011.

Rosneft is governed by the principles of financial and business transparency, prevention of any conflict of interest among the Company management (including among members of the governance bodies) and the Company, and other cases of abuse of office.

Pursuant to the UN Anti-Corruption Convention of October 31, 2003 and ratified by the Russian Federation in 2006, as well as in the follow-up to the RF Federal Law On Anti-Corruption Enforcement, regulations aimed at transparency enhancement and anti-corruption enforcement are applied in Rosneft as in an international public company, including the Policy on Countering Involvement in Corruption Practices and the Corporate Fraud Prevention Policy.

Pursuant to the above corporate regulations, a list of positions has been approved, which specifies officials who shall provide the Company with data on their income, property and estate liabilities, both with regard to themselves and with regard to their spouses and minority age children. The aforementioned list includes the positions of the Chairman of the Management Board, Vice Presidents, Chief Accountant, Heads of Departments and their deputies, Heads of Divisions and their deputies, Directors of Subsidiaries and their deputies.

The core executives of the Company shall file asset and income disclosure in full and in a timely manner both with regard to themselves and members of their families to the government authorities.

Par. 7, clause 2 of minutes of the meeting called by the First Deputy Chairman of the Government of the Russian Federation, I.I. Shuvalov No. ISH-P13-98pr of October 03, 2013.

Instruction of the President of the Russian Federation
No. Pr-113 of January 17, 2012.

Instructions of the Government of the Russian Federation No.VP-P13-459 of January 27, 2012 and No. ISH-P13-7501 of December 07, 2012.

Advanced level of corporate governance and information openness are the key priorities of Rosneft business. The Company is consistently demonstrating leadership in terms of the amount of disclosed messages related to corporate business.

Strategies aimed at raising (i) operating and investment efficiency of business activities, (ii) transparency of business operations, (iii) investment appeal as well as at (iv) procuring the consumers in the domestic market with fuel and energy recourses of standard quality and at acceptable prices, and (v) meeting the requirements of process and environment safety shall be an integral part of the updated Long-Term Development Program of the Company.

6.2. REMUNERATION OF THE COMPANY MANAGEMENT AND EMPLOYEES, KPI SYSTEM DEVELOPMENT.

Instruction of the President of the Russian Federation
No. Pr-825 of April 06, 2009.

Instructions of the Government of the Russian Federation No. VP-P13-1823 of April 06, 2009, No. VP-P13-2099 of April 20, 2009, No. VZ-P13-4252 of July 28, 2009, No. ISH-P13-2232 of April 08, 2010, No. KA-P13-8297 of December 04, 2010.

Par. 3, clause 2 of minutes of the meeting called by the First Deputy Chairman of the Government of the Russian Federation, I.I. Shuvalov No. ISH-P13-98pr of October 03, 2013.

Subclauses 4, 5 of Instruction of the President of the Russian Federation No. Pr-1474 of July 05, 2013.

Instruction of the Government of the Russian Federation No. ISH-P13-2043 of March 27, 2014.

Directives of the Government of the Russian Federation
No. 3984p-P13 of June 24, 2015.

Instruction of the President of the Russian Federation
No. Pr-2821 of May 12, 2014.

Instruction of the Government of the Russian Federation No. DM-P13-9024 of December 04, 2014.

Directives of the Government of the Russian Federation
No. 2303p-P13 of April 16, 2015.

The corporate top management incentive system based on KPI performance has been in place since 2009.

Rosneft KPI system includes:

• financial and economic indicators (TSR, EBITDA, ROAСE, cost saving, net income);
• industry-wide indicators (production volume, hydrocarbon reserves replacement).

KPIs for the Company top management are developed according to the guidelines of the Company Development Strategy and Long-Term Development Program.

The following activities were performed in Rosneft to meet the Instructions of the Government of the Russian Federation:

• amendment of the Regulation on annual bonus payment to the top managers and the heads of independent structural divisions of Rosneft;
• enactment of the Rosneft Regulation on annual bonus payment to the Rosneft General Director and CEOs of the Group companies.

The Regulations provide for annual bonus payment upon results of the relevant individual KPI performance by each top manager.

• amendment of the Rosneft Regulation on annual bonus payment to middle managers, specialists and employees of the Company administration.

The Regulation provides for annual bonus payment upon results of the relevant individual KPI performance by middle managers. The rest of the employees of the Rosneft administration get their bonus according to the collective performance indicators in Rosneft, blocks and estimation of personal productivity (work contribution coefficient).

• approval of the Company KPI System.

Target KPI values for top management and the results of their implementation are annually approved by the Board of Directors according to recommendations of the HR and Remuneration Committee under the Board of Directors.

In 2015, the strategies for achieving the indicator of operating costs reduction by at least 2-3 % p.a. was developed in the Company and approved by the Board of Directors. The strategies are included in the updated Long-Term Development Program.

KPI of top managers of business streams for 2015 include the indicator of costs reduction by at least 3 %.

The labor contract of the Rosneft President includes the obligation to ensure performance of the approved Strategy and Long-Term Development Program of the Company.

6.3. INSURANCE OF THE LIABILITY OF INDEPENDENT DIRECTORS REPRESENTING THE INTERESTS OF THE RUSSIAN FEDERATION.

Instruction of the President of the Russian Federation
No. Pr-2206 of August 03, 2011.

Taking into account the scale of Rosneft projects, materiality and significance of delivered transactions, as well as wide use of foreign law for project deals structuring and Rosneft stock trading at international exchanges, the Company has been providing liability insurance to the Company management members for eight years now, including independent members of the Board of Directors. Insurance is intended to compensate to the Company, its shareholders, creditors and other parties the damage caused by unintentional erroneous actions (inaction) of the insured persons in the course of management activities.

As endorsed by the General Shareholders Meeting on June 27, 2014, the insurance contract terms and conditions shall remain identical to the previously applied contract, and the total liability insurance coverage amount (indemnity limit) shall be USD 150 mln (for the insurance period from July 10, 2014 through July 10, 2017), with USD 1 mln of a special additional limit for each independent director and USD 6 mln of additional coverage for all independent directors.

7.1. INVESTMENT PROJECTS AUDIT.

The Instruction of the First Deputy Chairman of the Government of the Russian Federation, I.I. Shuvalov
No. ISH-P9-8314 of November 19, 2013.

Directives of the Government of the Russian Federation
No. 2988p-P13 of May 30, 2013.

The Company implements the key principles of performing process and price audit of investment projects, adjusted to the industry specifics and the Company business model.

On November 16, 2015 the Board of Directors approved the Company Policy on Operating and Investment Efficiency Improvement. The Policy and a number of other internal documents related to investments and projects management determine the procedure for supervision over investment project implementation at all stages of its life cycle, from initiation through completion. The Company business processes include performance of the expert review of investment and project solutions. Depending on the type of such project it includes:

• multiple factor analysis of projects in terms of technical and process efficiency, and investment appeal, performed by the specific collective bodies (technical and process expert councils and investment committees);
• independent evaluation by external experts;
• evaluation of project documents in relevant state institutions.

7.2. ACCESSION TO THE ANTI-CORRUPTION CHARTER.

Section IV of the meeting minutes in the Ministry of Economic Development of the Russian Federation
No. 53-OF of May 24, 2013

The Company supports the decision on adoption of the Anti-Corruption Charter of the Russian Business and rigorously adheres to anti-corruption principles determined by federal laws and Decrees of the President of the Russian Federation.