The objective of the Program is to attract, motivate, reward, and retain key employees of Polymetal as well as to align their interests with the interests of its shareholders by linking long-term remuneration to the Company’s share price performance.

The Program establishes a Bonus Fund, to be financed by the Company, which will consist of up to 30 million ordinary shares of Polymetal. The shares from the Bonus Fund are to be sold to the Program participants for a nominal price of 1 (One) Russian rouble per share.

Each participant of the Program will be allocated a certain percentage of the Bonus Fund based on their position, job performance, career growth potential, and other relevant criteria. The list of participants is expected to consist of approximately 70 individuals (including people employed both in the corporate headquarters and at operations) and to be approved by the Board, together with percentages of the Bonus Fund to be allocated to each participant, by the end of 2010.

In the base case scenario the aggregate number of shares comprising the Bonus Fund will be determined on September 11, 2013 (the “Base Date”) according to the following formula:

N = (30,000,000 * (X – S)) / X, where:

N is the total number of shares comprising the Bonus Fund;

X is the weighted average price of Polymetal shares in US Dollars during the period between March 11, 2013 and September 11, 2013 inclusive; and

S is the calculation price equal to US$16.74 per share.

The possible deviations from the base case scenario include:

• Extension of the participants’ rights to purchase shares from the Bonus Fund by one year (at the sole discretion of each participant). In this case, X will be equal to the weighted average price of Polymetal shares in US Dollars during the period between March 11, 2014 and September 11, 2014 inclusive, and S will be equal to US$18.75 per share; and
• The option to execute the rights to purchase all or part of the shares from the Bonus Fund before the Base Date under certain circumstances, such as change of control of the Company. In this case, both X and S will be adjusted accordingly.

In any event, if the dividends are distributed by the Company before the total number of shares comprising the Bonus Fund is determined, S will be also adjusted for the amount of such dividends.

The Program’s design therefore ensures that its participants will be able to realize economic benefits only in case of the Company’s future share price significantly increasing its current levels.

The closing price of Polymetal Global Depositary Receipts (“GDRs”) on LSE on September 1, 2010 was US$12.9 per GDR.

“We firmly believe that the alignment of interests between shareholders and management is an absolute requirement for sustained long-term value creation in Polymetal,” said Vitaly Nesis, CEO of Polymetal.

“I am proud and satisfied with the new incentive program which creates powerful and appropriate financial stimulus for Polymetal employees. The high threshold share price level set for the accrual of gains to Program participants demonstrates both management's and Board's strong conviction in Polymetal's further appreciation potential.”

ABOUT POLYMETAL

Polymetal is a Russian gold and silver miner with operations and development projects in Russia and Kazakhstan. The Company produced 0.6 million of gold equivalent ounces in 2009 and is targeting to double its total production by 2012 mostly as a result of commissioning of the new projects, all of which are now under construction. A key element of Polymetal’s strategy is creation of processing hubs with the goal to ensure the most efficient and responsible utilization of financial and human capital by treating ores and concentrates from various sources at centralized locations.

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