#TH

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Volgograd

Voronezh

Samara

Kazan

Moscow

Saint Petersburg

Yaroslavl

Investor’s Guide

2018

Tabl

e of

Con

tent

sWelcoming address of the Head of the Nizhny Novgorod Region Gleb Nikitin

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Address of Managing Partner, KPMG in Russia and CIS, Oleg Goshchansky

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Opening remarks of General Director of JSC Nizhny Novgorod Region Development Corporation Timur Khalitov

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Six reasons to choose the Nizhny Novgorod Region

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INVESTMENT OPPORTUNITIES

10General Information about the Nizhny Novgorod Region

Area for Investments

Industrial Potential

Automotive Industry

Chemical industry

Agriculture

Shipbuilding

Timber Industry

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12

14

16

20

25

32

35

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INFRASTRUCTURE AND COMPETENCES

38Transport Infrastructure

Information Technologies

Education and Science

Investment Infrastructure

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43

46

48

COMFORTABLE ENVIRONMENT

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GOVERNMENT AND BUSINESS

52Business support measures

Nizhny Novgorod Region Development Corporation

Public-Private Partnership

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59

62

Contact details72General Information about KPMG

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ss Head of the Nizhny Novgorod Region Gleb Nikitin

Dear friends,

The Nizhny Novgorod Region is one of the most rapidly developing regions of our country. It enjoys an exceptional geographical location and can draw on extensive industrial, scientific and manpower resources.

The growing interest of business in implementing large-scale projects in the Nizhny Novgorod Region demonstrates the region’s vast potential.

Our region is located in the very heart of the Volga Region at the crossroads of major transport corridors, which translates into logistical benefits and a proximity to sales markets. That is why a number of world-famous companies are already doing business in the Nizhny Novgorod Region today.

At present the Nizhny Novgorod Region is a region which values serious investors and is eager to minimize their risks. The Government of the Nizhny Novgorod Region continues developing the investment infrastructure and is doing it’s best to provide the best workingenvironment for investors.

There’s a whole range of sites to launch production available in the region, a system of technoparks and business incubators, more than 20 educational resource centres where specialists in all areas can be trained, and also legislative incentives for business. We established the Nizhny Novgorod Region Development Corporation to ensure effective work with investors.

I am convinced that your business will be able to make a quantum leap in the Nizhny Novgorod Region with minimum risks and maximum opportunities! I wish you every success!

Gleb Nikitin

Head of the Nizhny Novgorod Region Chairman of the Government

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General Director of JSC Nizhny Novgorod Region Development Corporation Timur Khalitov

Dear colleagues,

Today the Nizhny Novgorod Region is one of Russian most advanced and fastest growing regions with great potential for the development of investments.

Thanks to one of the most developed multifunctional industrial complexes in the country, investors will be able to find the suppliers and partners they need in our region, thereby increasing the economic viability of the projects they are implementing. At the same time, the region’s location at the crossroads of the country’s main highways and railways, from north to south and from west to east, provides ideal conditions for logistics.

Our advantages include the most acclaimed system of resource centres in Russia, facilitating the training of highly skilled professionals for any industry, a developed infrastructure, a trust-based dialogue with the Government, proximity to the largest sales markets, and regional legislation that fully complies with investor’s requirements.

A specialised organisation was created in the region to facilitate interaction between the authorities and the investor according to the one-window system – the Nizhny Novgorod Region Development Corporation. The Corporation assists investors at every stage of implementation of their investment projects and helps them to create the requisite business infrastructure.

We take account of the requests of the business community and work every day to improve our support measures. Our goal is to create the best possible environment for investments in the region.

Welcome to the Nizhny Novgorod Region!

Timur Khalitov

General Director of JSC Nizhny Novgorod Region Development Corporation

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Add

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Dear colleagues,

We are pleased to present you this Investor’s Guide on the Nizhny Novgorod Region.

Today, this region ranks first in the Volga Federal District (VFD) in terms of foreign direct investments. The Nizhny Novgorod Region has a great deal to offer: a favourable geographic location, developed transport infrastructure, enabling legislation, skilled staff, high research and development potential, and, most importantly, a regional leadership that is willing to build truly effective relations with investors based on real action and not mere words.

As someone who has worked for many years with both Russian and international businesses, I am well aware of the attention paid to the selection of a site for investment projects. This decision is always based on a thorough examination of all the information available and a comprehensive assessment of risks. I hope that the booklet you are holding in your hands will provide a good starting point for your consideration of the opportunities offered by the Nizhny Novgorod Region.

Good luck!

Oleg Goshchansky

Managing Partner KPMG in Russia and the CIS

Managing Partner, KPMG in Russia and the CIS, Oleg Goshchansky

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Nizhny Novgorod Region The Region’s strong industrial potential and highly diversified economy:

— Increase in the localisation of components in the automotive and shipbuilding industries (the current level of use of imported components varies from 50% to 80%, depending on the models)*;

— Development of uncultivated arable land (around 10%); satisfaction of both internal demand and the demand of neighbouring regions for agricultural products (import substitution potential of meat and fruit of approx. 50%);

— Favourable environment for the development of pharmaceutical businesses and also the establishment of fine organic synthesis production facilities due to the region’s high level of research potential and highly skilled employees, as well as available sites that meet all the necessary environmental standards.

1

Strategically advantageous geographic location

The Nizhny Novgorod Region is located at the crossroads of large transport corridors. The construction of the high-speed Moscow-Kazan railway line, with trains operating at an expected maximum speed of 360 km/hour, and a terminal and logistics centre will reduce the cost and duration of carriage from Novorossiysk, Vladivostok, and Saint Petersburg on average by 25% and 55%, respectively. This will enable Nizhny Novgorod to become one of the largest transport hubs in Russia.

2

*According to the Association of Russian Automakers.

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Highly skilled personnel

The region has a significant potential of human resources. Each year 23,000 specialists graduate from higher education institutions in the Nizhny Novgorod Region, with 30% of technical skills in high demand in the region. The average salary in the Nizhny Novgorod Region (RUB 30,500) is lower than in Russia’s other major educational centres (RUB 42,500 in Moscow, Saint Petersburg, Ekaterinburg, Novosibirsk and Tatarstan). This provides investors with a competitive advantage when developing industry in the region.

3

High R&D potential

More than 2,500 patents have been registered in the region over the past four years. The region ranks 4th in Russia in the R&D index, and 3rd in terms of the number of cutting-edge production technologies that have been deployed. Investors can leverage the region’s work experience with high-tech and sophisticated production facilities.

4

One of the most investor-friendly regulatory frameworks in Russia

The region grants various incentives to investors that have been enshrined in legislation: the lowest possible regional tax rates; guarantees of legislative non-regression provisions for investors and no increase in the tax burden; and a system of financial support measures making it possible to reduce costs substantially on the implementation of investment projects.

5

Comfortable environment

The Nizhny Novgorod Region has created all the conditions and infrastructure nec-essary to meet the needs of local residents and enable companies to do business.

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Info

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ion The Nizhny Novgorod Region

One of the largest regions in Central Russia in terms of actual area.

Nizhny Novgorod is 400 km from Moscow

400 km

3 hours 35 minutes by train

45 minutes by air

3,235,000

in VFD*3rd

Population density: 42 people per km2 (compared to average population density in VFD* of 28.6 people per km2)

Nizhny Novgorod Region

Kirov Region

Republic of Bashkortostan

Republic of Udmurtia

Perm Territory

Orenburg Region

Samara RegionSaratov Region

Penza Region Republic of Tatarstan

Republic of Marii El

Chuvash RepublicRepublic of Mordovia

Ulyanovsk Region

Nizhny Novgorod

Gen

eral

*VFD – Volga Federal District

Population

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The Nizhny Novgorod Region

Nizhny Novgorod Region

Kirov Region

Republic of Bashkortostan

Republic of Udmurtia

Perm Territory

Orenburg Region

Samara RegionSaratov Region

Penza Region Republic of Tatarstan

Republic of Marii El

Chuvash RepublicRepublic of Mordovia

Ulyanovsk Region

30,598 RUB

Average salary in the region

higher than the average in Volga Federal District4.9%

Growing market of the Nizhny Novgorod Region

Source: The Ministry of Economic Development and Investments of the Nizhny Novgorod Region.

GRP*, billion RUB

FORECAST

+6.7%

GRP growth rate in the Nizhny Novgorod Region

Average GRP in VFD

1,104 1,18

2

1,218

Temperate climate (moderate continental climate)

Average temperature in January

Average temperature in July–12 С +21 С

*GRP– gross regional product

1,277 1,4

66

1,784

2013

2014

2015

2016

2017

2020

2025

2030

925

1,010

741

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The Nizhny Novgorod Region today is a region which values serious investors and is eager to minimise their risks. We are one of the first regions in the country where investment projects have been granted priority status by law and are eligible for tax concessions.

Gleb Nikitin

Head of the Nizhny Novgorod Region Chairman of the Government

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Source: The Central Bank of the Russian Federation, data for 2017.

Foreign investors are actively investing in the Region’s investment projects: the Nizhny Novgorod Region ranks 1st in Volga Federal District in terms of foreign direct investments 41 billion

One of the three regions in the Volga Federal District confirmed IC3 investment appeal rating in 2017.

Source: National Rating Agency.

High investment appeal

One of the six regions in Russia and one of the four regions in the Volga Federal District that confirmed 2A investment climate rating in 2017.

Source: Expert RA.

Mid-level investment potential and minimal risks

1st RUB

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26.9%

Indust

rial

pote

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al

The Nizhny Novgorod Region is characterized by lower macro economic risks and lower dependence on oil and gas prices compared to the oil-dependent federal districts of Russia owing to its diversified economy, driven by its developed automotive, shipbuilding and petrochemical industries, IT sector, agricultural and wood processing industries. The region’s industrial production growth rates are higher than the average in Russia and the Volga Federal District. The region is also a platform for B2B interaction between companies manufacturing and selling high-tech products (ROSATOM, LUKOIL, SIBUR Holding, GAZ Group, OMK, Krasnoye Sormovo Factory, Volkswagen, AGC, Heineken, Magna, Nizhpharm, GK Russkoye Pole, and others).

Foreign investors have positive experience of successful project implementation in the region (Liebherr, STADA, Knauf, Bosal, Unilin, Danieli, Solvay, and others).

The region has well-established sales and distribution channels to end consumers at both local and international level.

The region’s trading partners include 146 countries in both the former Soviet Union and farther abroad.

Oil refining

26.4%

12.9%

7.2%

6.9%

5.1%

0.7%

13.9%

Metallurgy

Automotive industry

Chemical industry

Food industry

Electronics

Wood processing industry

Other

Industrial structure in 2017

Source: The Ministry of Economic Development and Investments of the Nizhny Novgorod Region

in foreign trade turnover in 2017

104.7% Industrial production index in 2017 (above the average index for Russia and Volga Federal District(101.1%))

in VFD2nd

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The region’s capacity of processing industries ranks 7th in Russia and 2nd in the Volga Federal District

Production growth in the processing industry is indicative of the favourable environment for business development in the region and its low dependence on commodity markets.

Source: The Ministry of Industry, Trade, and Enterprise of the Nizhny Novgorod Region

943,8

43 90

,996

998,1

85

1,073

,471

1,108,4

22

1,180,5

01

91,09

9

93,73

8

98,92

9

123,0

88

2013 2014 2015 2016 2017

Processing industries

Production and distribution of electricity, gas, and water

RUB million

in VFD2nd

in Russia7th

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Auto

moti

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The automotive industry is one of the Nizhny Novgorod Region’s strategic industries, featuring a full value chain – from the manufacturing of components to the sale of road-ready cars. Moreover, the current level of localisation of automotive components gives investors the potential to develop their production facilities.

150 billion

Sales of cars manufactured at the region’s plants in 2016

Growth by

24%

largest sector in the region’s economy

2 nd

IN 2016, THE REGION MANUFACTURED:

buses

10,200 +47%by 2015

light commercial and medium duty vehicles

55,800 +24%by 2015

trucks

5,600 +3,2%by 2015

RUB

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SITES FOR THE INDUSTRY’S PRODUCTION FACILITIES

>> ZMZ Industrial Park*

>> Unutilised sites at GAZ Group

buses73%

freight transport

45%

PROSPECTS

Further increase in localisation of the auto component manufacturing, including the establishment of joint ventures.

Special investment contracts for companies localising production.

Increase in exports of the industry’s products in order to increase loading of production capacities and, as a result, an increase in demand for automotive components.

Average salary in the industry (higher than than the industry average in Volga Federal District (RUB 32,158))

THE SHARE OF RUSSIAN PRODUCTS MANUFACTURED IN THE REGION

The region has longstanding technological traditions and well-established training systems for skilled personnel

Human resources

A full production chain is being established for the automotive industry in the region with the potential for the entry of new investors and further localisation of auto component manufacturing.

(including LCVs)

TRENDSConsolidation of the assets of manufacturers of mechanical engineering products and set up of large integrated structures in mechanical engineering sectors.

Increase in state support for high-tech sectors of the economy.

Development of cost-efficient technologies to increase margins.

The use of information technologies in conventional mechanical engineering is increasing the appeal of the automotive industry by reducing final consumer prices, enabling manufacturers to compete with their foreign counterparts.

GAZ Group is the leading manufacturer of commercial vehicles in Russia.

Key enterprises at the GAZ Group’s production sites in the region:— LLC GAZ Car Factory;— PJSC GAZ;— LLC Pavlovo Bus Plant.

GAZ Group is the leader in Russia when it comes to creating highly effective international partnerships: Volkswagen, Daimler.

The Group is also involved in the localisation of auto component manufacturing together with other leading international companies: Bosal, Bulten and Mitsubishi.

*See the Investment Infrastructure Section.

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Auto

moti

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ry JSC Magna Automotive RusThis company is the leading global supplier of automotive components with 340

plants and 93 engineering centres in 29 countries worldwide.

The company has been working on the Russian market since 2007. In 2008 Magna Exteriors & Interiors acquired Technoplast, a company in Nizhny Novgorod. The Nizhny Novgorod Region was selected due to its proximity to car manufacturers and highly skilled personnel.

In 2010 the company launched four plants in Russia – two in Saint Petersburg, one in Kaluga, and one in Nizhny Novgorod.

In 2012 the company signed a letter of intent with the Government of the Nizhny Novgorod Region.

In 2015 Magna Automotive Rus opened a modernized automotive component production facility at its own site with investments of over RUB 1.5 billion.

#S

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Ilya Smolin

Chief Operating Officer for Russia Magna Exteriors Division

Magna decided to implement a project in Nizhny Novgorod to consolidate its position as a supplier of painted exterior parts on the Russian market and to facilitate further growth and development of the production of car interior parts.

Our production facilities and our business are closely tied to the assembly operations of our consumers – car manufacturers. After locating our plant in the Nizhny Novgorod Region, we were able to perform the orders of our clients on time.

The region has a staff training system for the automotive industry, a technical school, and a long history connected with the automotive industry.

It should be noted that the regional authorities have established effective communications with the business community. The single-window system facilitates the prompt consideration of requests from investors and the adoption of the corresponding decisions.

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Chem

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ryThe town of Dzerzhinsk, located 30 kilometres from Nizhny Novgorod, is the centre of the chemical industry in the Nizhny Novgorod Region.

The Dzerzhinsk industrial zone is unique for combining high-tech per-sonnel, access to markets and areas that meet the required environmen-tal standards all in one town:

Access to sales markets due to its high transport accessibility (Gorky railway station and the federal highway М7 Volga are located near the production site).

Affordable industrial real estate.

A large pool of highly skilled professionals (more than 3,500 budget-funded openings in institutes in Dzerzhinsk, five R&D and project institutes).

An industrial site that meets all the environmental standards required for the development of fine organic synthesis production facilities, including the manufacturing of active substances for the pharmaceutical industry.

5research institutes

Total revenue of the region’s chemical enterprises

354 billion

RUB

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Industrial sites and parks, highly skilled staff, and lower industry average salaries compared to the Volga Federal District, make it possible to successfully develop chemical production in the region.

TRENDS

Increase in the depth of refining of oil products.

Increase in expenditures on innovation-based research and development of new technologies.

Increase in domestic demand for mineral fertilizers and polymers.

Replacement of imported products with Russian analogues.

SITES FOR THE INDUSTRY’S PRODUCTION FACILITIES*

>> Oka Polymer Industrial Park

>> Perspective Dzerzhinsk Vostochny Industrial Park

>> Kstovsky District Industrial Zone

>> Dzerzhinsk Industrial Zone

PROSPECTS

Location of fine organic synthesis production facilities.

Localisation of the production of pharmaceutical substances, which is also one of the main priorities of the Development Strategy of the Russian pharmaceutical industry to 2030.

The establishment of a fine organic chemical synthesis industry manufacturing products with high added value.

Processing of by-products of the oil refining sector.State University of Nizhny Novgorod by name of N.I. LobachevskyNizhny Novgorod State Technical University by name of R.E. Alexeev

Human resources

Average salary in the industry (less than the industry average in Volga Federal District (RUB 49,481))

— Research and Design Institute of Urea and Organic Synthesis Production

— Polymer Chemistry and Technology Research Institute by name of V.A. Kargin

— Chemistry Research Institute of the Nizhny Novgorod State University

— Institute of Organometallic Chemistry by name of G.A. Razuvaev

— Institute of Chemistry of High-Purity Substances by name of G.G. Devyatyh

Research institutes

Number of people employed in the industry

13 people076

The petrochemical sector is one of the key anchors of the region’s economy.

*See the Investment Infrastructure Section.

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NizhnyNovgorod

Dzerzhinsk

Kstovo

Nizhny Novgorod

— Orgkhim Biochemical Holding

— JSC NIZHPHARM (Stada)

Dzerzhinsk

— PJSC SIBUR Neftekhim

— LLC Sintanol Plant GK Norchem

— СJSC Korund-CN

— Sintez OKA Group of Companies

— JSC Orgsyntez

— OJSC Aviabor

Kstovo

— LLC LUKOIL- Nizhegorodnefte- orgsintez

— LLC RusVinyl

— PJSC SIBUR Kstovo

KEY ENTERPRISES OF THE SECTOR:

Total revenue of the region’s chemical enterprises

LUKOIL Nizhegorodnefteorgsintez

79%

7%14%

NIZHPHARM

Other

Breakdown of revenue

One of the priorities of the Nizhny Novgorod Region’s investment policy is to attract cutting-edge high-tech manufacturers of pharmaceutical substances and innovative fine organic synthesis technologies to develop a

state-of-the-art chemical sector for the region’s economy. To this end, the region is creating all the necessary infrastructure, which will include industrial parks and industrial sites ready to accommodate chemical production facilities.

354 billion

RUB

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esLLC RusVinylLLC RusVinyl is a Russian-Belgian joint venture manufacturing polyvinyl chloride in the

Kstovo District of the Nizhny Novgorod Region, which was formed by the Russian company SIBUR and the European Group Solvay. The official opening ceremony

of the production complex held in September 2014 was attended by President Vladimir Putin. Today, LLC RusVinyl is one of the leaders in Russia’s polymer industry, with annual designed capacity of 330,000 tonnes of PVC and 225,000 tonnes of caustic soda.

The products manufactured by RusVinyl - polyvinyl chloride and caustic soda - have traditionally been raw materials used in other industries: construction, the automotive industry, electrical engineering, the manufacture of furniture, packing materials, consumer goods, footwear, clothes and sports equipment, agriculture, the chemical industry, and the pulp and paper industry. The implementation of the project allowed to provide Russian market with the best world practicies and technologies. The establishment of new petrochemicals manufacturing facilities has a positive impact on the economic development of the country, resolving an important import substitution objective.

LLC RusVinyl manufactures suspension and emulsion polyvinyl chloride.

This is currently the only manufacturer of emulsion PVC in Russia.

LLC RusVinyl manufactures its products using state-of-the-art European technology, which guarantees environmental and industrial safety in strict compliance with both the environmental legislation of the Russian Federation and international environmental and industrial safety standards.

Approximately 500 high-performance workplaces with competitive salaries have been established at the enterprise

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Orgkhim Biochemical HoldingFounded in the Nizhny Novgorod Region

in 2001, over the past few years Orgkhim Biochemical Holding has been transformed

from a regional plant in the small regional town of Uren into the only manufacturer in Russia and the second largest global manufacturer of safe petrochemical plasticizer oils for car tyres and rubber. The holding is also a global leader in wood chemistry and holds leading positions on the Russian market in the manufacture of a wide range of wood-chemical products.

Today, Orgkhim Biochemical Holding consists of three plants in Russia with their decision-making unit in Nizhny Novgorod, production and service platforms in Perm and Togliatti, and offices in China, Korea, Singapore, Malaysia, Poland and Luxembourg.

Orgkhim Biochemical Holding in figures:

— more than RUB 7 billion – annual turnover of the holding;

— 60% of products are shipped for export;

— 125,000 tonnes/year of extender oils and 48,000 tonnes/year of wood chemical products, representing the total output of the holding’s main plant in Uren;

— 40,000 tonnes/year – total joint production in Arkhangelsk Region;

— 70,000 tonnes/year – projected output at a plant in Malaysia;

— Won two tenders for new product and technology development projects in accordance with Government Resolution No. 218 of the Russian Federation On State Support Measures for the Development of Cooperation of Russian Academic Institutions of Higher Education and Organisations Implementing Integrated Projects for the Establishment of High-Tech Production Facilities;

— 5 times – Orgkhim was awarded with the Standard of Honour by the Governor of the Nizhny Novgorod Region;

— 4 times – the holding was awarded a high distinction by the Government of Nizhny Novgorod Region and the expert community as the Best Exporter of the Year in Russia;

— in 2017 the General Director of the Holding Nikolay Khodov was recognised as the Exporter of the Year at the annual Person of the Year awards ceremony.

Nikolay Khodov

General Director Orgkhim Biochemical Holding

From the outset we were convinced that the Nizhny Novgorod Region was the place where we had to launch production. We always wanted to work here, to develop the innovative potential of our own region, and expand and create new jobs. Innovation-based development has been a priority for our holding for more than 17 years. This is facilitated by the comfortable investment environment created in this region, and the smooth interaction with international partners from different countries. The Nizhny Novgorod Region also boasts significant industrial potential and highly skilled workers, engineering employees and research staff.

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Agri cu

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e Today the Nizhny Novgorod Region is a developing agrarian region holding leading position in the production and processing of agricultural products.

7,662,000Land bank of the region

ha

39%Agricultural land

10% of agricultural land and arable land is available for development.

About

The cost of land in the region is one of the lowest in Volga Federal District.

Area of agricultural land, including:

2,992,000

1,896,000 ha

528,000 ha

Grazing

407,000 ha

161,000 ha

Source: The Ministry of Agriculture and Food Resources of the Nizhny Novgorod Region.

1,357,000 hаUsed

200,000 hа

339,000 hаSuitable

Unsuitable

Other

Tillable

Haymaking

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Total amount of the investment projects to be implemented in the region in 2018-2020, including:

Breakdown by sector

2Processing

Poultry farming5.0

Crop growing1.4

Dairy farming4.5

billion

billion

billion

billion

Pig farming10.8

billion

Source: The Ministry of Agriculture and Food Resources of the Nizhny Novgorod Region.

AGRICULTURAL PRODUCTS IN 2017:

1 324,000 tonnes

Grain crops

894,100 tonnes

Potatoes

602,000 tonnes

Milk

142,900 tonnes

Cattle and poultry

17.4%

1.3%

0.6%

–5.7%

351,800 tonnes

Vegetables

2,300 tonnes

Flax fibre

308,300 tonnes

Sugar beet

1,366.2Eggs

1.5%

56.3%

0.3%

–3.0%

23,7 billion

RUB

RUB

RUB

RUB RUB

RUB

million eggs

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in overall food production in overall production of poultry and milk

in planted area of potatoes In grain crop acreage

in VFD3rd

The current level of agricultural production enables the region to be completely self-sufficient for such agricultural products as grain crops, potatoes, and also poultry farm products.

Vegetables10%

Meat55%

Milk30%

Total revenue of top 13 companies in 2016

GK Russkoye Pole28%29%

Other

Breakdown of revenues

JSC Seymovskaya Poultry Farming Plant

18%

LLC Chernyshikha Meat Processing Plant

14%

LLC NNPP11%

Source: The Ministry of Agriculture and Food Resources of the Nizhny Novgorod Region.

Fruit and berries62%

Average salary in the industry (higher than the industry average in Volga Federal District (RUB 17,226))

THE SHARE OF IMPORTED PRODUCTS AND PRODUCTS FROM OTHER REGIONS IN NIZHNY NOVGOROD REGION

18,416 RUB

17 billion

RUB

in VFD3rd

in VFD5th

in VFD8th

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TRENDSSatisfaction of demand on the domestic market in niches with a high share of imports.

Stimulation of demand for new products on the domestic market.

Entry into foreign markets.

Opportunities to increase the rate of return through an increase in production efficiency and the manufacturing of high added-value products.

PROSPECTS

Creation of advanced processing facilities of agricultural products.

Development of breeding.

Organisation of effective product sales channels:

— Cooperation between local agricultural producers;

— Creation of a network of modern specialised storage facilities;

— Creation of a network of wholesale distribution centres;

— Establishment of mutually beneficial relations between producers and retail chains.

Stabilisation of retail prices.

In addition to import substitution, a change in consumer preferences also incentivises the appearance of new products. Hard cheeses, for example, have significant potential from this perspective.

Number of people employed in the industry

85 people000

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tori

es AFG National GroupA griholding AFG National, already the largest Russian rice producer and one of

market leaders in packed cereals, started cultivation of potatoes and open ground vegetables in the Nizhny Novgorod Region. The holding invested more than RUB 3

billion over three years.

Full cycle production includes cultivation of vegetables; watering, washing and packing of potatoes and carrots in consumer packaging. Products are sold through the largest federal distributing facilities.

The vegetable production of the Nizhny Novgorod Region has reached a new level due to modern technologies. The following refrigerated and ventilated warehouses with a total capacity of 40,000 tonnes were built: potato storage for 16,400 tonnes in Lukoyanovsk district, carrot storage for 18,500 tonnes in Shatky district, potato seed storage for 6,000 tonnes in Dalnee Konstantinovo district. More than 3,500 ha of land is irrigated to increase productivity and quality. Production of seed potatoes was organised and the seed-growing company received elite status.

Currently AFG National in Nizhny Novgorod is:

— 15,400 ha of land;

— 5 production sites in five districts;

— 20,000 tonnes or 90% of annual carrot production in the region;

— more than 40,000 tonnes of table potatoes and 15,000 tonnes of seed potatoes annualy..

Valery Maslanov Director, LLC AFG National NN

We have been working in the Nizhny Novgorod Regionfor several years. During this time, we have established good partnership relations with the regional government. We are convinced that after theestablishment of the Development Corporation, any undertakings and interesting investment projects will be implemented even more efficiently and will require less input from the investor. This is extremely important not only for the development of the agribusiness and other sectors of economy, but also for the development of the Nizhny Novgorod Region as a whole.

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LLC RassvetRassvet Farming Company specialises

in industrial production of fresh berries: common garden strawberries, blueberries,

raspberries, blackberries, and honeyberries. The enterprise is unique in the Nizhny Novgorod Region and in Russia as a whole in terms of area, output and the diversity of the berries on offer.

The berry fields of LLC Rassvet, located in Sergachsky District, the Nizhny Novgorod Region, cover an area of 100 hectares. There are plans to expand the area of berry fields to 300 hectares with an increase of the annual harvest to 700 tonnes, which would represent one-tenth of the total commercial production of berries in Russia.

LLC Nizhny Novgorod Hemp FibreNizhny Novgorod Hemp Fibre specialises in growing and

processing commercial hemp fibres. The land cultivated for the crop and production facilities are located in the

Pilninsky District, Nizhny Novgorod.

This is the first industrial project in Russia to create cottonised fibre from hemp. To manufacture the end product, they use as raw materials the best varieties of androgynous cultured hemp for verdure, which are included in the State Register of Plant Varieties of the Russian Federation.

Thanks to automatic modular equipment from Laroche, five tonnes of commercial hemp straw (stock) can be processed per hour virtually dust-free, resulting in production with minimal losses of hemp hurds (shives) and fine hemp fibre - hemp with 2 or 3% of sprits. The fine fibre is subsequently processed using unique domestic shock wave technology to produce cottonised fibre - hemp with less than 1% of sprits.

Hemp, the strongest plant fibre in the world, is used to manufacture construction, composite and bandaging materials, paper, ropes, textiles, and cotton wool.

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LLC NNPP Subsidiary of Norwegian Russia Baltic Pork Invest (RBPI)

In 2016, the first pig farm of RBPI Group was launched in Vadsky District, Nizhny Novgorod Region, with the amount of investment exceeding 3 bln rubles. This top-priority investment project uses government subsidies to cover engineering infrastructure expenses. The project has created over 100 jobs and

resulted in significant payments to the state promoting the development of Vadsky District.

In February 2016 an agreement was signed with the Government of Nizhny Novgorod Region on the construction of a second pig farm in Bolshemurashkinsky District, Nizhny Novgorod Region. Total investments exceed RUB 3 billion. The capacity of the new facility will exceed 19,000 tons of pork per year, with total production of 180,000 pigs per year. The farm will be put into operation by the end of 2018.

The pig farm uses state-of-the-art European processes and premium pig breeds.

As soon the second farm begins operating at full capacity, Nizhny Novgorod Region will be self-sufficient in top quality domestic pork. Given the investment prospects of the region, the investor and the Government of Nizhny Novgorod Region signed an agreement on the construction of the third and fourth pig farms with a capacity of 180,000 pigs each in February 2018. A site is currently being selected for the development. There are plans to invest over 3 billion rubles in this project. It will also lead to new jobs. The investor intends to apply pig-breeding technologies in line with global standards and also ensure the highest level of zoosanitary conditions.

The construction of new pig farms will enable the region to export pork to other Russian regions. The regional government is holding discussions with the investor on the possible construction of a processing facility to make sausages and other meat products.

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The unique location of the Nizhny Novgorod Region on the banks of the Volga and Oka Rivers opens up extensive shipbuilding opportunities and makes it possible to deliver vessels to the Azov, Caspian, Black, Baltic, and White Seas.

A shipbuilding cluster already exists in the Nizhny Novgorod Region. We are interested in continuing its development. The Development Programme of United Shipbuilding Corporation stipulates the manufacturing of both finished products and components. The only issue now is where these production facilities will be located. I will do all I can to ensure that they end up in the Nizhny Novgorod Region.

Gleb Nikitin Head of the Nizhny Novgorod Region

Chairman of the Government

Ship

build

ing

Total revenue in 2016

Revenue distribution

structure

Krasnoye Sormovo Factory

38%

JSC Okskaya Shipyard22%

Volga Shipyard17%

Other23%

Russia’s largest shipbuilding companies work in the Nizhny Novgorod Region.

17.5 billion

RUB

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The region is currently developing additional mechanisms to support the shipbuilding industry, including the potential establishment of a special economic industrial production zone for shipbuilding enterprises.

A federal law in support of the shipbuilding industry stipulates incentives on corporate property tax and land tax for a period of 10 years, and also introduces a zero rate of VAT and customs duties on the equipment needed to upgrade the shipyards.

SUPPORT

The Nizhny Novgorod Region is one of the largest industrial centres in the Russian Federation with vast shipbuilding potential.

At present, shipbuilders in the Nizhny Novgorod Region manufacture a wide range of civilian vessels and a fleet of auxiliary ships for the Russian Navy.

The high uploading of local shipyards, coupled with the import substitution policy in respect of expensive import components, opens up opportunities for the development of the joint and independent manufacturing of components.

60–80% Share of imported components

The high cost of import components and the volatility of the RUB/USD exchange rate have an adverse impact on the profitability indicators of shipbuilding companies, which vary from -5% to 26%.

17organisations and enterprises, including:

TRENDS

Localisation of the manufacturing of components.

Increase in the share of civilian shipbuilding.

Development of shipbuilding for the fisheries sector.

Import substitution and increase in the share of domestic materials and components in shipbuilding.

Average salary in the industry (lower than the industry average in Volga Federal District (RUB 31,311))

PROSPECTS

Manufacturing of components for shipbuilding (main engines and diesel generators, steering propellers and bow thrusters, shipboard cranes and lifting gear, deck equipment).

Construction of fishing vessels.

Construction of river-sea transport and passenger vessels.

Export of civilian products.

THE SHIPBUILDING INDUSTRY CONSISTS OF:

4 design bureaus;

13shipbuilding and ship repair enterprises.

30,848 RUB

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HUMAN RESOURCES

Volga State University of Water Transport (VSUWT) is the largest educational institution focusing on the sector in Volga-Vyatka Region, consists of: four branches, five specialised secondary schools, a training, retraining and continuing education centre for executive staff and specialists in the area of water transport, and a research sector.

STABLE ORDER BOOKIn 2017, after the state support quotas were allocated for fishing fleet renewal, Okskaya Shipyard concluded a contract on the construction of a series of six fresh fish trawlers (Project СРТР38М).In 2017 this enterprise also concluded contracts on the construction of ten non-self propelled barges (Project ROB20), and eight dry cargo ships (Project RSD32M).

100% Krasnoye Sormovo Factory

100% Volga Shipyard

100% ZNT Yard

95% Sokolskaya Shipyard

graduates per year

>1,000

STABLE ORDER BOOK IN 2017:

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Tim

ber

indust

ryNizhny Novgorod Region has substantial reserves of forest land:

in the production of newsprint, with a 15% share

Total area of designated forest land (49% of the region’s total area)

3.8 million ha

Total standing volume of timber in the region’s forests, predominately coniferous species, birches, and aspen

564.9 million m³

Commercial forests 63.4%

in Russia3rd

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TRENDS

Increase in wood processing depth and integrated wood utilization.

Localisation of industries producing sanitary tissue products.

Increase in demand for Russian-made furniture.

Average salary in the industry (higher than the industry average in Volga Federal District (RUB 17,222))

The Russian Federation accounts for a larger share of global production of low added-value products (round wood and sawn wood) than advanced wood processing products (only 2% of the production of wood panels and pulp and paper production).

BREAKDOWN OF FORESTED AREA BY MAJOR GROUPS OF SPECIES:

Soft-wooded broadleaf (birch, aspen, lime, alder, willow) KEY ENTERPRISES

— JSC Volga— LLC FK Nordplit— LLC Slavic Furniture Company — LLC Unilin— GK ROS— LLC Silva

— LLC Uta— LLC Stora Enso Packaging— LLC Hygiene Technologies — OJSC Bumsnab— LLC Nizhkarton

1,702,000 ha

Coniferous (pine, fir, larch)

PROSPECTS

Establishment of new production facilities using and processing low-grade wood and wood raw materials.

Production of medium-density fibreboards (MDF) and high-density fibreboards (HDF).

Production of oriented strand boards (OSB).

Production of plywood and cardboard.

Production of furniture.

1

2

3

4

5

Today trends toward the resumption of growth in demand and an increase in the prices of the prod-ucts of the timber industry are being seen on the Russian market.

The annual volume of unused softwood timber in the Nizhny Novgorod Region equals 2 million m3, which is a significant resource for further development of the industry and the possible organization of local production, including the production of oriented strand boards and chipboards.

PRICES OF RAW WOOD:

Types of raw woodPrice,

RUB/m3, net of VAT

Spruce pulpwood (2 to 4 species) 1,300

Pinewood pulpwood (1 to 3 species) 700

Birch pulpwood (1 to 3 species) 600

Aspin pulpwood (1 to 3 species) 330

Types of raw woodPrice,

RUB/m3, net of VAT

Coniferous pulpwood (1 to 3 species) 310

Coniferous process feedstock 160

Coniferous saw timber (1 or 2 species) 160

Birch veneer blocks (1 or 2 species) 150

18,204 RUB

1,700,000 ha

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Indust

ry#S

ucc

esss

tori

esLLC UnilinUnilin operates in several areas of the woodworking business. The Group

has 21 manufacturing sites in a number of countries, and consists of three divisions:

— flooring (Quick-Step, Pergo, Balterio laminate and parquet);

— panel production;

— production of heat insulation blocks.

Since 2005 Unilin has been a part of the American corporation Mohawk Industries. Mohawk Industries is the leading manufacturer of flooring in the USA, producing carpet flooring, solid wood, laminate, ceramic tiles, and vinyl coatings.

In June 2012 Unilin opened a factory producing laminated floorings in Dzerzhinsk (the Nizhny Novgorod Region), investing EUR 50 million.

Since its opening the factory has increased output from 2.3 million m3 in 2012 to 5.3 million m3 in 2017. This represents the maximum capacity based on the factory’s current configuration.

To increase production capacity, produce new types of products, and to respond more proactively to consumer needs in the Russian Federation, it was decided in 2016 to expand the factory with investments of EUR 24 million.

During project implementation, the factory was refurbished, new storage facilities were built, and laminate producing capacities were increased. The maximum output of the retrofitted factory equals 10 million m2 of laminate per year. At present the factory produces 30 different laminate collections. The factory currently employs more than 200 people.

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Tran

sport

in

fras

truct

ure

The development of a transport logistics system and the expansion of the infrastructure of the Nizhny Novgorod Region make it possible to increase access to sales markets. Consequently, in the period from 2018 to 2020 the regional authorities plan to allocate RUB 42 billion for the programme “Development of the Transport System of the Nizhny Novgorod Region”.*

* Source: Nizhny Novgorod Region Budget 2018.

The region’s geographic location, the construction of a terminal andlogistics centre and the Moscow-Kazan high-speed railway line (762 km) will make Nizhny Novgorod one of the largest transport and logistics hubs in Russia.In the longer term, thanks to the terminal and logistics centre the cost of delivering a 40-foot container to the main Russian hubs (Vladivostok, Novorossiysk, and Saint Petersburg) will fall on average by 25% and the delivery time by up to 55%.

Helsinki

Saint Petersburg

Ekaterinburg

Tyumen

Omsk

Saratov

Volgograd

Astrakhan

Makhachkala

Baku

BerlinBrest

WarsawMinsk

Smolensk

Moscow

Nizhny Novgorod

Nizhny Novgorod — at the crossroads of Russia’s transport corridors.

42 billion

RUB

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PUBLIC ROADS AND FREIGHT TURNOVER IN NIZHNY NOVGOROD REGION

Road transport

2012

21,42

5

2013

22,05

2

2014

22,18

5

2015

22,21

1

2016

22,31

6

+891 km

5Over years,

The increase in the length of public roads with a hard surface.

+18%

Increase in freight turnover in the Nizhny Novgorod Region, while total freight turnover in Russia contracted by 6%.

2,430 2,547

2,398

2,8852,872

Source: Federal State Statistics Service.

National highways passing through the Region: M-7 Volga, R-158 Nizhny Novgorod – Saratov, R-159 Nizhny Novgorod – Kirov – Yaransk.

Length of public roads, km Freight turnover, million tonne-km

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Water transport

Nizhny Novgorod

Semenov

Dzerzhinsk

BogorodskPavlovo

Sarov

VyksaKulebaky

Arzamas

Sergach

Boldino

Lyskovo

Gorodets

Zavolzhye

Kstovo

Krasnye Baki

Voskresenskoye

Vetluga

Uren

Shakhunya

Shaigino

Pizhma

Severny

Bor

Uzhovka

Lukyanov

Bol. Kozino

Vetluzhsky

Diveevo

The Volga (the largest river in Europe) and Oka, which run through the Region, occupy a central place in the system of Russia’s waterways.

14.5%

Share of the river transport market in 2016

in Volga Region 5.5% for Russia

5

Access toseas

Caspian, Black, Azov, Baltic and White Sea

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Nizhny Novgorod

Semenov

Dzerzhinsk

BogorodskPavlovo

Sarov

VyksaKulebaky

Arzamas

Sergach

Boldino

Lyskovo

Gorodets

Zavolzhye

Kstovo

Krasnye Baki

Voskresenskoye

Vetluga

Uren

Shakhunya

Shaigino

Pizhma

Severny

Bor

Uzhovka

Lukyanov

Bol. Kozino

Vetluzhsky

Diveevo

Rail transport

Construction of the high-speed Moscow-Kazan railway line will start soon. Trains will operate at a maximum speed of up to 360 km/hour. A non-stop journey from Moscow to Nizhny Novgorod will take 1.5 hours.

1,800

Length of the railways at the beginning of 2017

km

8 hours

to Saint Petersburg

<4 hours

to Moscow

Air travelNizhny Novgorod’s Strigino International Airport is the main alternate airport to the Moscow air hub.

27,800 m2

Area of the terminal

Throughput capacity1.5

million people year

Total freight carried in 2016 (4% more than last year)

16 million tonnes

In 2017, Strigino Airport worked with

35 airlines

to

47 destinations

Total passenger traffic in 2017 (up 24% on the previous year)

966,000 people

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Doskino Terminal and Logistics CentreThe construction of Doskino Terminal and Logistics Centre will make Nizhny Novgorod one of the largest transport and logistics hubs in Russia. The transport and logistics centre will connect the railway ports of Saint Petersburg, Krasnodar Region, and Primorye Region, with the railway line, Strigino International Airport, and the Nizhny Novgorod River Port.

KEY SYSTEM SOLUTIONS

Regular intermodal freight train service.

Integrated customs infrastructure.

Distribution capacities.

Favourable location compared to industrial zones.

ADVANTAGES

The only terminal in the region capable of accepting a container or piggyback train that is 71 railcars (1,050 m) long, without uncoupling them.

The only terminal in the region capable of performing cargo handling operations for semitrailers and other motor vehicles (piggy-back transportation).

An effective cargo transshipment system from rail to road transport and vice-versa.

Regular intermodal freight train service with seaports of the Baltic Sea, Primorye, Azov and Black Sea basin, the Siberian transport and logistics centre, the Urals, Central Russia, and Chinese provinces, thereby making it possible to optimize logistics costs and supply chains.

Multimodal storage compound.

Substantial decrease in cargo delivery costs and increase in the speed of delivery.

COMPARATIVE COST (RUB) AND TRANSIT TIME (DAYS) OF THE DELIVERY OF 40-FOOT CONTAINERS TO THE MAIN HUBS BY RAIL

Routes Currently (2018),

RUB/daysIn the long term,

RUB/daysSaving

Vladivostok – Nizhny Novgorod 104,330 / 22 93,079 / 12 11% / 50%

Novorossiysk – Nizhny Novgorod 40,357 / 11 29,136 / 5 28% / 55%

Saint Petersburg – Nizhny Novgorod 30,177 / 10 19,186 / 5 36% / 50%

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Tech

nolo

gies

in software exports

Due to the availability of trained specialists, infrastructure (IT Parks), international companies’ success in transferring part of their functions to the region, and the competitive cost of software development compared to the information technology centres – Moscow and Saint Petersburg – the Nizhny Novgorod Region is an attractive option for IT solutions.

Info

rmat

ion

in Russia

4th

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iClusterThe decision to set up an iCluster was made at the 10th international forum of information technologies ITFORUM 2020/Digital World in 2017. The iCluster represents the symbiosis of research centres and industrial enterprises that will enable the region to attract new investments and increase the competitive advantages of cluster participants.

Company name Core business Headcount

MERA Development of customised software for telecommunications, automotive, retail, medical, energy and other companies 1,300

Intel Development of tools for developers in the areas of computer vision and machine learning, multimedia and IoT 700

HARMAN Development of built-in automotive systems, IoT and mobile devices 600

MFI Soft Development of information security systems, traffic filtering and legal control systems and anti-fraud systems 330

NetCracker Development of OSS/BSS and SDN/NFV solutions for telecommunications service providers 310

Tecom Development of radio broadcasting and telecommunications software 160

Auriga Development of applied and systems software for high-tech, medical, and auto-motive companies 160

Seldon Development of information analysis systems 150

Five9 Development of cloud call centres (SaaS) 130

Transset Development of ERP, OSS and CMMS solutions 130

Artezio Development of customised software in information systems for enterprises and web development 85

Sberbank Technologies

Development of banking software 80

MAJOR SOFTWARE DEVELOPERS IN NIZHNY NOVGOROD

The cost of software development in the Nizhny Novgorod Region is one competitive advantage in the IT sector.

Source: Federal State Statistics Service.

Moscow Nizhny NovgorodSaint Petersburg99,287 77,553 48,726

AVERAGE SALARY IN THE SECTOR (IN RUB)

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Nizhny Novgorod has already successfully created technological parks.

Ankudinovka IT ParkThe technopark’s infrastructure stipulates facilities for work and comfortable accommodation: research laboratories, office centres with parking lots, banks, a hotel, residential complex, shopping centre, kindergarten, polyclinic, etc.Companies granted resident status are entitled to lease office space at a preferential rate of 60% of the office’s market price, and are also eligible for free educational courses, legal and accounting advice, as well as project support and assistance in finding sources of financing.

INDUSTRY SPECIALISATION OF THE TECHNOPARK

Information and communication technologies

Instrument-making industry

Machine building

Electronics engineering

Chemical and biomedical technologies

Development of new materials

Jobs created during 2016 and 2017

616

Residents in the technopark

30

billion

have been produced2.7

Products worth

Investments attractedmillion234

Sarov TechnoparkSarov Technopark is a public-private technopark set up to create and market innovative global and national technologies based on the competencies of the Federal State Unitary Enterprise Russian Federal Nuclear Centre All-Russian Research Institute of Experimental Physics, AFK Sistema, RUSNANO Fund for Infrastructure and Educational Programmes, and other high-tech companies.The technopark’s infrastructure includes office space and parking lots, a research and technology centre, research and production blocks, a laboratory block, business incubator, hotel and townhouses for comfortable living.

INDUSTRY SPECIALIZATION OF THE TECHNOPARK

Information Technologies

Energy-efficient technologies

Sensors and automation

Materials and coatings

Biomedicine

Jobs created 668

Residents in the technopark

44

RUB

RUB

billion

have been produced1.39

Products worth

RUB

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Educa

tion

and s

cie

nce The high level of education combined with the

significant share of the population that is unemployed will enable business to secure qualified staff rapidly.

Students

>50,000

11Higher institutions of education

28Innovative resource centres

>80Secondary vocational schools

Major Russian and international companies operating in the region and cooperating closely with higher education institutions play an important role in the training and retraining of specialists, including: Intel, LG, HARMAN, NVIDIA, NetCracker, Sberbank, SIBUR Holding, MERA, and others.

graduate annually from higher education institutions

THE HIGHER AND SECONDARY VOCATIONAL EDUCATION IN THE REGION IS FOCUSED ON MANUFACTURING, TRADE, AND BUSINESS

Processing industries

Trade and business

Services provided

Transport and communications

Other

Higher education Secondary vocational education

600 Candidates in Science 30

annually qualify as Doctors of Science

Postgraduate students

Source: Federal State Statistics Service.

1,797

1,808

1,074

3,153

3,469

7,245

3,776

3,752

2,242

6,584

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The high level of education combined with the significant share of the population that is unemployed will enable business to secure qualified staff rapidly.

6national research and development centres

60developed by regional scientists are introduced into production annually

300are involved in research and development

organisations40,000people

and

The Nizhny Novgorod Region is one of the most attractive engineering regions in Russia and boasts extensive experience of the development and deployment of innovations.

THE SHARE OF HIGH-TECH PRODUCTS IN THE TOTAL VOLUME OF MANUFACTURED GOODS IN MONETARY TERMS

innovative technologies

The large number of R&D projects and their high level of conversion into improvements at production facilities results in rapid growth in the region’s technological infrastructure. In future, this potential will help to create production facilities with high added value. The proximity to other high-tech industries will enable enterprises to promptly cover their requirements for components. A large number of R&D organisations will make it possible to retain this trend for the long term.

2,200were issued from 2013 to 2016, of which 60% were not technological inventions.

patents

8% 20% 17% 16% 11% 8% 6% 3%

Average for Russia Republic of

TatarstanNizhny Novgorod

RegionMoscow Region

Tula Region

Republic of Bashkortostan

Tver Region

Tyumen Region

Source: Federal State Statistics Service.

DEVELOPED STATE-OF-THE-ART MANUFACTURING TECHNOLOGIES

STATE-OF-THE-ART MANUFACTURING TECHNOLOGIES BEING USED

Moscow

Saint Petersburg

Chelyabinsk Region

Moscow Region

Sverdlovsk Region

Republic of Tatarstan

Nizhny Novgorod Region

61

6499

109

121

153

206

Moscow

Moscow Region

Nizhny Novgorod Region

Sverdlovsk Region

Bashkortostan

Saint Petersburg

Tyumen Region

10,722

18,800

16,532

10,379

9,324

9,026

7,680

Source: Federal State Statistics Service.

Source: Federal State Statistics Service.

in Russia7th

in Russia3rd

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The current network of both public and private infrastructure facilities ensures the region’s high investment appeal, as it enables an investor to promptly select a site that is tailor-made for the project – from a startup to a large industrial enterprise.

2technology parks

8business incubators

Inve

stm

ent

infr

astr

uct

ure

Industrial parks with all the necessary infrastructure in place 6 +1

under construction

+261Greenfield

126Brownfield

and

251(135+116)

Sites for industry (Greenfield + Brownfield)

76(59+17)

Sites for industries more than 5 hectares (Greenfield + Brownfield)

Source: Interactive investment map of Nizhny Novgorod Region.

Dzerzhinsk

Zavolzhye

Bor

Nizhny Novgorod

Balakhna

2

6

1

5

3,4

1 Almaz-Antey

2 Oka Polymer

3 Bor Industrial Park

4 Bor Municipal Park

5 ZMZ

6 Real Invest

INDUSTRIAL PARKS OF NIZHNY NOVGOROD REGION:

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Real Invest

Almaz-AnteyNizhny Novgorod

INFRASTRUCTURE:

Area: Greenfield: 60 ha, Brownfield: 100,000 m2

Water: up to 3,600 m3/day

Electric power: up to 20MW

Natural gas: up to 5,000 m3/hr.

Hard surface roads

Access to Kostarikha railway station

Oka PolymerDzerzhinsk

INFRASTRUCTURE:

Area: Greenfield: 150 ha, Brownfield: 45,000 m2

Water: 25,000 m3/hr.

Electric power: 115MW

Natural gas: 17,000 m3/hr.

Hard surface roads: 29 km

Promyshlennaya railway station: 200 railcars per day

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Bor Industrial ParkBor

INFRASTRUCTURE:

Area: Greenfield: 10 ha, Brownfield: 13,000 m2 (production premises)

Water: 3,120 m3/day

Electric power: 0.9MW

Natural gas: 16,550 m3/hr.

Railway spur: on the site

Bor Municipal ParkBor

INFRASTRUCTURE:

Area: Greenfield: 30 ha

Water: 3,120 m3/day, which can be increased

Electric energy: 10MW, which can be increased

Natural gas: 10,000 m3/hour, which can be increased

Railway spur: on the border of the field

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ZMZZavolzhye

INFRASTRUCTURE:

Area: Greenfield: 8.4 ha, Brownfield: 110,000 м2

Water: 1,320 m3/day

Electric power: 8.3MW

Natural gas: 2,085 m3/hr.

The industrial park was created at Zavolzhye Engine Factory and specializes in the location of production facilities manufacturing automotive components and equipment.

Real InvestNizhny Novgorod

INFRASTRUCTURE:

Area: Greenfield: 165 ha

Water: 1,440 m3/hr.

Electric power: 23MW

Natural gas: 10,000 m3/hr.

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mea

sure

sB

usi

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s su

pport

KEY TAX AND FINANCIAL INVESTOR SUPPORT MEASURES

Type of measure/concessionChemical industry

Shipbuilding AgricultureAutomotive

industryForestry

Priority Investment Project

Special Investment Contract (tax and financial support measures)

Regional Investment Project (tax incentives)

Subsidies to compensate expenses on loan interest

Subsidies to compensate R&D costs

Tax concessions Reduced rates/

exemptions from taxes/statutory

payments

Regional investment projects (RIP)

Territory of Socio-Economic Development (TSED) in Sarov

Priority investment projects (PIP)

Special investment contracts (SIC)

Financial support

measures

Subsidising investor costs (leasing, R&D, issue of pilot batches of supplies)

Preferential lending to SMEs

Public private partnership/concession agreement (for infrastructure projects)

Subsidising costs on loan interest

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Priority Investment Project (PIP) in the Nizhny Novgorod Region

— Amount of the tax concessions ≤ amount of investment.— Guaranteed stability of regional statutory regulation and no increase in the tax burden for the effective

period of the PIP.

Conclusion of an investment agreement with the Nizhny Novgorod Region by tender (approval of the investment plan, form of state support, rights, obligations, and liability of the parties).

To conclude an investment agreement, the investor must develop an investment plan and the business plan of the project according to the form approved by regional law.

ELIGIBILITY CRITERIA:

NON-TAX SUPPORT MEASURES FOR PIP:

1. Subsidies to compensate interest expenses on a loan.

2. Subsidies to compensate the costs on the creation of infrastructure facilities/connection to utility networks.

3. Guarantees of Nizhny Novgorod Region/receipt of a tax credit for regional taxes.

RECIPIENT:Legal entities involved in investment activities and implementing PIP (without any restrictions on the line of business)

ISSUER:Nizhny Novgorod Regional Government

and Legislative Assembly

INCOME TAXReduced rates to the regional budget

up to 12.5%

PROPERTY TAXExemption from the tax on newly created/purchased property

Reduced to 0.55%Tax incentives

on upgraded property.

LEASE OF LANDReduction/exemption from lease payments for land owned by the state/municipality

LAND TAXExemption

Amount of investment 100 million

Project implementation in a subsidized municipal district (subsidies of more than 5%).

Effective period of the tax concessions 5+2 years, but not to exceed the payback period of the PIP.

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Special Investment Contract (SIC)

The share of income from the sale of goods produced under a SIC represents at least 90% of the total.

Activities must be associated with the creation or upgrade of a production facility and/or the manufacturing of industrial products that have no analogues in the Russian Federation (it is anticipated that the list will be expanded in accordance with the draft law on SIC 2.0).

ELIGIBILITY CRITERIA:

Additional guarantees:

— Guarantee that the aggregate tax burden will not be increased after the conclusion of the special investment contract.

— Opportunity to obtain confirmation that the industrial products have been manufactured in the Russian Federation in order to gain access to the public procurement market.

— Simplified procedure for participation in public procurement opportunity to be a supplier of products manufactured under a SIC on a sole-source basis) provided that

RECIPIENT:Legal entities involved in investment activities, which implement SIC in certain industries:

ISSUER:The Ministry of Industry, Trade, and Business

of the Nizhny Novgorod Region

Mechanical engineering

Tool-making industry

Metal industry

Chemical industry

Forestry

Pulp and paper and woodworking industry

Electronic industry

Aviation

Pharmaceuticals

Biotechnology

Medical industry

Light industry

Shipbuilding

Telecommunications equipment

Radioelectronics

INCOME TAXReduced rates payable to the regional and federal budgets

LEASE PAYMENTSReduced lease payments for the land owned by the state/municipality

up to 0%

PROPERTY TAXExemption

ACCELERATED DEPRECIATIONof property, plant, and equipment manufactured under the SIC (with a ratio of ≤ 2)

Tax incentives

the amount of investments in the project equals at least

Amount of investment 750 million

RUB

3 billion.RUB

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Exemption from the payment of income tax to the federal budget.

The share of income from the sale of goods manufactured under a RIP is at least 90% of total income.

Inclusion in the register of participants of regional investment projects.

ELIGIBILITY CRITERIA:

Regional Investment Project (RIP)

OR

Amount of investment 50 3 the concession is granted until 2027

million RUB + for the

period of years

Amount of investment 500 5 the concession is granted until 2029

million RUB + for the

period of years

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PROPERTY TAXExemption

LAND TAXExemption

Territory of Socio-Economic Development (TSED) in Sarov

Registration of a new legal entity in the TSED/no branches or representative offices outside the TSED/no status of regional investment project.

Compliance with the list of lines of economic activity that may be conducted as a result of the implementation of investment projects.

Conclusion of an agreement on performing activities with the TSED management company, for which purpose the business plan of the project must be developed in the form approved by regional legislation.

ELIGIBILITY CRITERIA:

Tax concessions

INCOME TAXReduced rate (payable to the regional budget):

for the first five years after the first profit is received

for the next five years

INSURANCE CONTRIBUTIONSAggregate reduction of the rate

5%10%

up to 7.6%

RECIPIENT:Legal entities involved in investment activities, which obtained the status of a resident of Sarov TSED in the following areas of expertise:

ISSUER:TSED management company

New energy

IT

Supercomputing and modelling

New materials

Scientific instrument building

Mechatronics

Medical industry

Food industry

Furniture industry

for 12 months after date of registration in the TSED RegisterAmount of investment 5 million

RUB

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Subsidising part of the costs related to the payment of interest on loans — Organisations within the framework of PIP

implementation: in the amount of half the refinancing rate (key interest rate) of the Central Bank of the Russian Federation.

— Organisations implementing integrated investment projects in priority sectors of civilian industry: no more than 70% of costs on rouble loans.

— Organisations ensuring the utilities infrastructure of land plots intended for the construction of housing as part of federal special-purpose programmes: no more than the key rate of the Central Bank of the Russian Federation on the date of the agreement, increased by 3 percentage points.

— Enterprises in light industry – subject to the existence of an effective business plan based on the decision of the tender committee responsible for selecting priority innovation projects: no more than 70% of costs on rouble loans.

Subsidising investor costs — On the payment of lease

payments on the conclusion of a financial lease agreement of energy-efficient equipment used during the implementation of projects after 1 January 2014, but no more than for five years.

— On compensation of part of R&D costs.

— On compensation of costs on the issue of pilot batches of production.

Public private partnership/ concession agreement (PPP/CA)— A tool for the implementation of

infrastructure projects.

— Establishment of mixed project funding sources; individual set of concessions for investors during the investment phase based on the results of the completion of the investment phase of the project.

— 12 PPP projects and CA with investments of RUB 7.6 billion have already been implemented.

Financial support

measures

Preferential lending to SMEs— Loan amount of RUB 5 million

to RUB 4 billion (for one project).

— Work in priority sectors: agriculture, manufacturing; production and distribution of electricity, gas and water; construction, transport and communications, waste collection, processing, and recycling; high-tech projects, inbound tourism.

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Regional non-tax measures to support agribusiness

REIMBURSEMENT OF PART OF THE COSTS ON INTEREST ON LOANS

Subsidy

Investment credits (up to 10 years) obtained:– from 1 January 2009 to 31

December 2015 inclusive —

– from 1 January 2016 –

Short-term loans (up to 1.5 years) obtained:– from 1 January 2012 to 31

December 2015 inclusive —

– from 1 January 2016 –

CONDITIONS:

– Targeted use of the borrowings by the borrower.

– Performance by the borrower of obligations to repay the principal and pay the accrued interest.

– The amount of the borrowings must not exceed the actual costs.

RESTRUCTURING OF THE DEBTS of agricultural producers to state budgets at all levels and to state extra-budgetary funds

Write-off of late payment interest and penalties, granting of deferrals and installment payments on the loan principal and accrued interest, and write-off amounts of the loan principal and accrued interest.

Regional budget funds provided in the amount of the actual outstanding arrears on the loan principal must be repaid in the current year in accordance with the debt repayment schedule approved in the restructuring agreements concluded with creditors.

CONDITIONS:

– Agreements concluded with creditors since 2003 on the restructuring of debt pursuant to the procedure stipulated by the Federal Law on restructuring.

– Completion of the selection process for inclusion as a participant in the rehabilitation programme.

REIMBURSEMENT OF COSTS RELATED ON UTILITIES INFRASTRUCTURE/ RECONSTRUCTION

CONDITIONS:

– Conclusion of an investment agreement with the Nizhny Novgorod Region by tender (receipt of PIP status).

– Planned amount of PIP investments – at least RUB 2.5 billion.

RECIPIENT:Agribusiness entities

ISSUER:The Ministry of Agriculture and of Food resources

of the Nizhny Novgorod Region

100%of the refinancing rate of the Central Bank of the Russian Federation;

100% of the key interest rate of the Central Bank of the Russian Federation.

80%of the refinancing rate of the Central Bank of the Russian Federation;

80% of the key interest rate of the Central Bank of the Russian Federation.

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Dev

elopm

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Corp

ora

tion The main goal of the Corporation is to create

the most favourable environment possible for investments in the Region.

Nizhny Novgorod Region Development Corporation is a unified support centre for investment projects in the Region.

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Nizhny Novgorod Region

Development Corporation

Governor of the Nizhny Novgorod Region

Russian and international

investors

OBJECTIVES:Searching for and attracting investors to the region’s priority economic sectors.

Assess priority projects from the perspective of economic development prospects and budget impact.

Establish a set of regional financial and non-financial support measures for the investor.

Submit federal concessions for priority projects.

Provide comprehensive support for implementation of projects based on the single-window system.

Mitigating risks and creating a favourable environment for investors at all levels

Investments in the region’s economy

National and international investors of the region: RDIF, RVC, RUSNANO, FPR, VEB, FSRN, FNTI, SME, World Bank, OECD, etc.

– Promote the region’s investment potential.

– Include the region’s projects in priority lists.

– Ensure interaction of investors with development institutions.

The Ministry of Property

– Resolution of land and property issues.

– Structuring PPP/CA projects.

– Developing and improving laws and regulations.

Infrastructure providers

– Issuing technical conditions.

– Ensuring connection to utilities.

The Ministry of Industry/Agriculture/ Transport

– Developing industry strategies.

– Initiating regional and cluster development projects.

– Developing and applying support measures.

– Developing and improving laws and regulations.

The Ministry of Economic Development

– Developing and monitoring the implementation of the region’s socioeconomic development strategy.

– Developing support measures.

– Developing and improving laws and regulations.

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Development Strategy and

Investment Council to the Governor

Economy of the Region

Project

Land and property Council to the Government of

Nizhny Novgorod Region

Land title

— Investments

— Jobs

— Tax proceeds

Priority status

steps from intention to implementation of the project3

INVESTOR

Nizhny Novgorod Region

Development Corporation

Dedicated institutions

step 1— Idea

— Business Plan

— Request for a land plot

— Request for utilities

— Expert examination of a business plan

— Budgetary impact

— Selection of land plot

— Approval of the support package

— Approval of connection to utilities

— Residency in the investment project

— Project of the special purpose vehicle

FEEDBACK

step 2

step 3

The Nizhny Novgorod Region Development Corporation will ensure a three-step process to obtain support measures for the investor and start implementing the project in the region.1Before the start of project implementation, the investor will only need to contact the Nizhny Novgorod Region Development Corporation based on the single-window system.2A unified IR and project management centre will make it possible to rapidly establish mutually advantageous relations between the region and the investor.3The Nizhny Novgorod Region Development Corporation will focus primarily on attracting industrial investors planning investments in excess of RUB 100 million.4

— Project

— Support

— Special Purpose Vehicles

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Public

pri

vate

par

tner

ship

in the level of development of public private partnerships (PPP)in Russia

8th

SCOPE OF PPP APPLICABILITY

Transport infrastructure and road traffic safety.

Education, culture, sports and travel.

Environmental Infrastructure regarding processing, utilisation, decontamination and disposal of municipal solid waste.

PROSPECTS

Utilities infrastructure

Health care

Social services to the general public

Currently, development of this area is ensuring the implementation of 12 PPP projects and concessions with total investments of approximately RUB 8 billion.

Six health and fitness facilities have been built; two more facilities are under construction; two ice palaces, two waste disposal sites; video recording systems for traffic violations have been created (more than 1,000 cameras throughout the region); a weights and dimensions control facility; and the reconstruction of a regional automated central public warning system was organised.

Currently the region is considering the possible implementation of seven more projects based on concession agreements with proposed investments of at least RUB 12 billion.

12projects

8amount of investments

billion

Travel

Transport

TODAY:

PLANNED PROJECTS ON THE BASIS OF PPP AND CONCESSION AGREEMENTS

FacilityAmount of

investments, RUB

Multifunctional centre including an oceanarium, hotel, and theme park

5 billion

Construction of a road 3.3 billion

Early disease detection centre Over 100 million

Four waste sorting plants To be determined

RUB

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PLANNED PROJECTS ON THE BASIS OF PPP AND CONCESSION AGREEMENTS

FacilityAmount of

investments, RUB

Multifunctional centre including an oceanarium, hotel, and theme park

5 billion

Construction of a road 3.3 billion

Early disease detection centre Over 100 million

Four waste sorting plants To be determined

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#C

om

fort

able

The Volga and Oka embankments are traditional places to take a walk through the city. Verkhne- Volzhskaya Embankment is in the city’s historical centre and stretches from Nizhny Novgorod Kremlin to Sennaya Square. Nizhne-Volzhskaya Embankment runs in parallel. One can see the Strelka (otherwise known as Spit) at the confluence of the Volga and the Oka from this Embankment.

Bolshaya Pokrovskaya is the main pedestrian street in Nizhny Novgorod with a number of architectural monuments, restaurants and cafes.

Rozhdestvenskaya Street is one of the oldest and most beautiful streets in Nizhny Novgorod. It has preserved the spirit of the merchant city of the 17th–19th centuries.

Embankments

Centre

All the conditions required for a comfortable life and business operations have been created in the Nizhny Novgorod Region. The developed infrastructure, numerous sightseeing attractions, and rich history of the region’s capital, Nizhny Novgorod, and also the implementation of major business and cultural events, increase the investment appeal of the region.

Kremlin The Nizhny Novgorod Kremlin is a fortress located in the historical centre and most ancient part of Nizhny Novgorod. This is the main socio-political and historical complex of the city.

Theatres There are several theatres in Nizhny Novgorod.They include three academy theatres (Drama, Pushkin State Opera and Ballet Theatre, and Nizhny Novgorod Puppet Theatre), comedy and youth theatres.

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The city’s public transport system includes buses, trams, trolleybuses, fixed-route taxis, metro, rope way and river transport.

Metro The Nizhny Novgorod metro consists of two lines and 15 stations. The metro network covers five of the eight districts in Nizhny Novgorod.

Rope wayRope way connects Nizhny Novgorod with the satellite town of Bor located on the left bank of the Volga.

The Nizhny Novgorod has been listed in the Guinness Book of Records of Europe and Russia for having the largest unsupported overwater span of 861.21 meters.

Transport

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Semenov

Boldino

Kerzhenets Nature Reserve

Bol. Kozino

Diveevo

IchalkovskiyReserve

Svetloyar Lake

Vadskoye Lake

Gorodets

Nizhny Novgorod

Golden Khokhloma in the Town of Semenov and The Brotherhood of Folk Craftsmen in the Town of Gorodets are among the Top 200 events in Russia.

Arts and crafts festivals

Alfa Future People is a festival of electronic music, historically held on an annual basis on the banks of the Volga River on the territory of the former airfield next to the Village of Bolshoye Kozino near Nizhny Novgorod.

In 2017, 50,000 people from 20 countries took part in the event. All the infrastructure required to hold the festival has been created: camp sites, car park, a parking lot for motorbikes and camper vans. In addition, 45 power hookups have been installed and an extensive Wi-Fi network has been deployed in the open air with a coverage of 400,000 m2.

Alfa Future People

Gorky Fest is a modern Russian cinema competition. The programme includes different movie genres: from short films and anthologies to experimental videos and documentaries.The Festival is held at leading venues in Nizhny Novgorod.Guests include Russian cinema stars and special foreign guests.

Gorky Fest

Region

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Semenov

Boldino

Kerzhenets Nature Reserve

Bol. Kozino

Diveevo

IchalkovskiyReserve

Svetloyar Lake

Vadskoye Lake

Gorodets

Nizhny Novgorod

Bolshoye Boldino

For 300 years, since the end of the 16th century, the ancestors of A.S. Pushkin have owned a family estate in the Village of Bolshoye Boldino. It was here that the poet created several of his most famous works.

Every year, several hundred thousand pilgrims visit the Diveevo Convent (otherwise known as the Holy Trinity Saint-Seraphim-Diveevo Monastery).

Diveevo Convent

Dmitry Volodin Investor (Sheraton and Ibis hotels)

I am convinced that the region is a tourist attraction: Nizhny Novgorod is a convenient venue for holding federal business forums, has convenient transport logistics and also boasts a number of cultural attractions.

The Nizhny Novgorod Region is already well-known for such large-scale events as Gorky Fest cinema festival, Alfa Future People music festival, and the International scientific and industrial Forum “Great Rivers”. Business activities are having a positive impact on hotel occupancy levels. Therefore, the development of newsworthy events in the region and the creation of a positive image among travellers in Russia will be a growth driver.

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HotelsThe Nizhny Novgorod Region is home to 336 lodgings that have been duly classified, with a total room stock of approximately 10,000 rooms and over 20,000 beds. Two hotels have been awarded a five-star rating; 19 hotels have been awarded 4 stars; 63 hotels have earned 3 stars; and 35 hotels were given 2 stars.New hotels of leading international hotel chains were also built in Nizhny Novgorod for the 2018 FIFA World Cup Russia:— Sheraton 5*;— Courtyard by Marriott 4*; — Hampton by Hilton 3*. Sheraton Nizhny Novgorod Kremlin hotel opened in September 2017. This was the first international five-star hotel in the historical centre of the capital of Volga Federal District. It is located in Teatralnaya Square in place of the former Moscow Hotel.

The Courtyard Hotel of the international hotel chain Marriott, opened in the centre of Nizhny Novgorod, on Ilyinskaya Street in December 2015. This is the first hotel of the international hotel operator Marriott in the region and is intended for the business tourism segment, which implies higher requirements on hotel amenities.

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St. Petersburg

Nizhny Novgorod

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Ekaterinburg

Novosibirsk

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Rostov-on-Don

Kiev

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TbilisiYerevan

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AlmatyTashkent

Bishkek

Krasnoyarsk

Kazan

Moscow 27YEARS IN RUSSIA

Vladivostok

Yuzhno-SakhalinskYuzhno-Sakhalinsk

Voronezh

Ufa

Minsk

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ContactsGleb NikitinHead of the Nizhny Novgorod RegionKremlin, Block 1, Nizhny Novgorod 603082

T: +7 (831) 419 7433doc@gubernator.kreml.nnov.ruwww.government-nnov.ru/governor

Timur Khalitov General Director of JSC Nizhny Novgorod Region Development Corporation13A Alekseevskaya St., Nizhny Novgorod 603006

T: +7 (831) 469 0360krno@invest.kreml.nnov.ru

Andrey GrichukHead of Volga Regional Center KPMG 117 Maxim Gorky St., Nizhny Novgorod 603006

T: +7 (831) 296 9202nnovgorod@kpmg.ru

Official investment portal of the Nizhny Novgorod Region www.nn-invest.com

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2018 KPMG. KPMG refers to JSC “KPMG”, “KPMG Tax and Advisory” LLC, companies incorporated under the Laws of the Russian Federation, and KPMG Limited, a company incorporated under The Companies (Guernsey) Law, as amended in 2008. All rights reserved.

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