ANNUAL REPORT2017

CONTENTSUCC IN FIGURES......................................................................................................................................3

MAJOR EVENTS IN 2017.........................................................................................................................6

SPEECH BY THE CHAIRMAN OF THE SUPERVISORY BOARD.......................................................9

SPEECH BY THE CHAIRMAN OF THE BOARD.................................................................................10

1. ABOUT COMPANY.......................................................................................................................11

1.1. GENERAL INFORMATION.................................................................................................11

1.2. GROUP STRUCTURE...........................................................................................................13

1.3. BUSINESS MODEL................................................................................................................16

2. MANAGEMENT REPORT............................................................................................................18

2.1. MARKET REVIEW AND SECTOR PERFORMANCE.....................................................18

2.2. UCC DEVELOPMENT STRATEGY....................................................................................25

2.3. RESULTS OF ACTIVITIES IN PRIORITIZED AREAS OF DEVELOPMENT.............33

2.4. FINANCIAL RESULTS..........................................................................................................382.5. MAJOR PR-EVENTS OF UCC GROUP

2.6. DEVELOPMENT PROSPECTS FOR INVESTMENT PROJECTS IN 2018

3. CORPORATE MANAGMENT

3.1. PRINCIPLES OF CORPORATE MANAMGMENT

3.2. UCC CORPORATE ETHICS

3.3. ANTI-CORRUPTION AND ANTI-BRIBERY MEASURES

3.4. UCC STRUCTURE AND ADMINISTRATION

3.5. COMPENSATION POLICY

3.6. REPORT ON COMPLIANCE WITH PRINCIPLES AND RECOMMENDATIONS OF CORPORATE MANAGEMENT CODE

3.7. INFORMATION ON MAJOR TRANSACTIONS IN 2017

3.8. INTERACTION WITH SUBSIDIARIES AND ASSOCIATED COMPANIES

3.9. RISK MANAGEMENT

4. SUSTAINABLE DEVELOPMENT REPORT

4.1. ABOUT REPORT

4.2. INTERACTION WITH STAKEHOLDERS

4.3. ECONOMIC ASPECTS OF ACTIVITY

4.4. ENVIRONMENTAL RESPONSIBILITY

4.5. SOCIAL RESPONSIBILITY

5. CONSOLIDATED FINANCIAL STATEMENT

5.1. AUDIT REPORTS

5.2. FINANCIAL REPORTING

6. ANNEXES TO ANNUAL REPORT

6.1. GLOSSARY AND LIST OF ABBREVIATIONS

6.2. TABLE OF STANDARD REPORTING ITEMS GRI

7. CONTACT ONFORMATION

UCC IN FIGURES

The State Program of Industrial Innovative Development of Kazakhstan for 2015-2019 (hereinafter referred to as the SPIID) includes chemical industry as one of the prioritized sectors of economy providing its diversification and competitiveness. United Chemical Company LLP was appointed to be one of the SPIID operators in chemical industry of the Republic of Kazakhstan.

UCC’s activities are focused on implementing projects in the field of oil and gas chemistry and agricultural chemistry. As of December 31, 2017, the asset profile of UCC is represented by 11 subsidiaries, associated companies and jointly controlled entities. Investment projects are financed both with participants’ own funds and through raised debt financing.

The source for financing the UCC’s own share in the projects is capitalization from the Sole Participant represented by Samruk-Kazyna JSC (hereinafter referred to as the Fund), as well as the Republican budget funds.

Dynamics of UCC’s Own Capital Growth in 2015-2017

0

50,000

100,000

150,000

200,000

250,000

178,291 165,454204,998

mln. tenge

2015 2016 2017

The growth of own capital is realized by means of investments from the Sole Participant in order to provide financing for the UCC investment activity. Also, in 2017 capital growth was realized by means of decreasing the accumulated loss of the previous years, which was connected with the positive net profit in 2017.

Quantity and Value of UCC’s Assets in 2015-2017

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The growth of UCC’s assets is connected with the growth of capital investments in chemical and petrochemical projects. UCC’s investments in subsidiaries and associated companies are made proportionally to the UCC’s own share in the projects. The growth of UCC’s assets is connected with the growth in capital investment implementation.

Key Performance Indicators in 2015-2017Item name 2015 2016 2017

fact fact plan factROACE, % 0.006 0.005 -3.4 4.4EBITDA margin, % -40.3 -31.1 -44 -58Number of industrial accidents per thousand people

0   1  0  0

The deterioration in the Partnership’s EBITDA margin within the reporting period compared to 2017 resulted from non-fulfillment of sales income.

Amount of Supplied Products and Services

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In 2017, 12.6 million pieces of polypropylene bags, 83 tons of polyethylene film and 2 967 tons of BOPP film were produced. 12.6 million pieces of polypropylene bags were sold for 558 million tenge, 101 ton of polyethylene film was sold for 52 million tenge, 2 472 tons of BOPP film were sold for 1 348 million tenge. In 2017 the sales of polymer products accounted for 1 958 million tenge.

Compared to 2016, a decline in the amount of sulfuric acid sales by 48 570 tons or 831 459 thousand tenge is observed. In 2017 the amount of block sulfur sales accounted for 160 753 tons. 161 020 tons of block sulfur were sold in 2016. In 2017 the product sales accounted for 2 824 million tenge.

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MAJOR EVENTS IN 2017

February:

within the framework of trade and economic cooperation between the Republic of Kazakhstan and the Republic of Uzbekistan, a joint venture named Kazakh-Uzbek Trade House Neftekhim Trading LLP was established, with UCC’s share in the charter capital accounting for 49%;

a Memorandum on the possibility of studying the construction and operation of checkpoints on the premises of SEZ NIPT was signed with BN-Product LLP;

during the first annual briefing by Samruk-Kazyna JSC for the diplomatic corps and representatives of foreign companies in the Republic of Kazakhstan, a Memorandum of understanding on the establishment of a joint venture for implementation of the project for catalytic cracking catalyst plant construction in the Republic of Kazakhstan was signed by UCC, NC KazMunaiGaz JSC and GRACE (USA);

a meeting was held between the Chairman of the Board of Samruk-Kazyna JSC, Shukeev U. E., and the management of Solvay (George Crauser, the President of Peroxides Global Business Unit), the world’s top leader in hydrogen peroxide production and sale, where the main issues related to implementation of the project for hydrogen peroxide production localization in Kazakhstan were discussed;

a PMC-contract for the management of the project named Construction of an Integrated Gas Chemical Complex in Atyrau region – Phase I (polypropylene) was concluded by KPI Inc. LLP and CB&I.

March:

a Memorandum of cooperation and understanding was signed with West Gas Oil LLP with regard to implementation of the project for Methanol plant, MTO plant (methanol and olefin production) on the premises of SEZ NIPT;

a conclusion regarding the estimate and design documentation related to the project of Construction of an Integrated Gas Chemical Complex in Atyrau region – Phase I (polypropylene) was received from RSE Gosexpertiza.

April:

the ceremony of Zavodskaya railway station opening was held with participation of the executives of Atyrau branch of Kazakhstan temir zholy–Freight transportation JSC, corporate members of SEZ NIPT and other officials;

the Investment Committee of Samruk-Kazyna JSC approved the concept of the hydrogen peroxide production localization project that is planned to be implemented jointly with Solvay.

May:

the target organizational structure of the Partnership, which was developed in accordance with the new UCC Development Strategy for 2017-2026, was approved by the decision of the Supervisory Board of UCC;

Memorandum of Understanding was concluded with Mubadala Investment Company and its subsidiary Borealis with regard to the polyethylene project.

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June:

during the meeting between the Minister of Energy of the Republic of Kazakhstan, Bozumbayev K., and the Minister of Energy and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Abdulaziz Al-Falih, a bilateral Memorandum of cooperation was signed by UCC and SABIC1;

a loan agreement was signed by HIM-Plus LLP and the China Development Bank for the amount of 100 million USD for the Caustic Soda and Chlorine Production Project;

within the framework of the plenary meeting of the Kazakhstan-China Business Council, a Memorandum of understanding between UCC and the China Development Bank was signed for opening a credit line in the amount of up to 1 bln. USD.

July:

a meeting between UCC and the management of Solvay (George Crauser, the President of Peroxides Global Business Unit) was held in Paris (France) where the main conditions for the joint venture establishment and project implementation were discussed.

August:

within the framework of the International Exposition, EXPO-2017, the 8 th conference named Progress in Reduction of СО2 Emission and Efficient Lifestyle took place, where the Chairman of the UCC Board delivered the report on Methanol as a Future Energy Security;

a meeting of the Chairman of the Board of Samruk-Kazyna JSC and the Chairman of the Board of UCC with the delegation from the world’s leading chemical company BASF (Germany) headed by Markus Kramer, the President of the Regional Division Europe at BASF CE, was held in Astana. During the meeting a Memorandum of cooperation and partnership was signed by UCC and BASF Central Asia LLP (hereinafter referred to as BASF), which provides for the following:

- cooperation in development of recommendations in accordance with laboratory results of grain quality on the basis of Organization of a Laboratory and Analytical Complex;

- organizing events aimed at raising awareness of local markets about joint products of BASF and UCC;

- joint development of sales markets for chemical products related to the areas of cooperation.

a contract for the supply of ammonium nitrate to the enterprises of Kazakhmys Corporation LLP was signed.

September:

an agreement with Shanghai MIO Chemicals Co. Ltd for the supply of the formulation for glyphosate-containing herbicides was signed.

October:

Andritz technological line maintenance service contract was concluded with COVALPSAS company.

November:

ЕРС-contract on the project for Caustic Soda and Chlorine Production was signed with the consortium including Kulager Construction Corporation LLP (leader of the consortium),

1SABIC (Saudi Basic Industries Corporation) – a public stock company specialized in chemical and metallurgical industries, and one of the five largest petrochemical companies in the world, the Kingdom of Saudi Arabia.

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Chemieanlagenbau Chemnitz GmbH (Germany), Promstroiproyekt Project Institute LLP, Aralservice LLP;

pursuant to the ЕРС-contract, KPI Inc. LLP issued notification to the general contractor (NTP) China National Chemical Engineering Co Ltd and CB&IEurope B.V. РМС-company about the commencement of the works.

December:

in order to reduce the debt burden, minimize currency risks and upgrade BOPP equipment, a loan agreement between the Fund and UCC and a loan agreement between UCC and Polymer Production LLP were concluded for the loan of 9.1 billion tenge to be provided by the Fund to Polymer Production LLP;

an agreement with Garant Optima (Hong Kong) for the supply of the formulation for glyphosate-based water-dispersible granules was signed;

256 tons of ammonium nitrate were supplied to Kazakhmys Corporation LLP;

2 new participants were registered on the premises of SEZ ChemPark Taraz: RM Industry LLP with the project for production of molybdenum trioxide and De plastic LLP planning the production of polyethylene products.

EVENTS AFTER THE REPORTING DATE:

January 2018:

during the visit of the Head of State, Nazarbayev N.A., to Washington (USA), a Framework agreement between UCC, NC KazMunayGas JSC and GRACE (USA) regarding the establishment of a joint venture to implement the project of catalytic cracking catalyst plant construction in the Republic of Kazakhstan was signed;

Supplementary agreement No. 3 to the off-take contract between Torgovo-Transportnaya Kompaniya LLP and JV SAP Kazatomprom LLP was signed, according to which a 100% sampling of sulfuric acid and an increase in the selling price of sulfuric acid are provided.

February 2018:

Kazzinc LLP and JV SAP Kazatomprom LLP concluded a contract for the supply of sulfuric acid;

based on the results of joint operation with the State Revenue Department in Zhambyl Region, a temporary customs control zone was established on the premises of the SEZ ChemPark Taraz.

March 2018:

during the official visit of the President of the Republic of Kazakhstan to the UAE, the Minister of Energy of the Republic of Kazakhstan, the management of Samruk-Kazyna JSC and UCC signed a memorandum on main terms of cooperation, a memorandum of understanding related to cooperation on the project for Construction of an Integrated Gas Chemical Complex in Atyrau region (Phase II – polyethylene) and an agreement for the project implementation jointly with Borealis.

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SPEECH BY THE CHAIRMAN OF THE SUPERVISORY BOARD

Dear colleagues, On behalf of the Supervisory Board of United Chemical Company LLP I am glad to

present the 2017 Annual Report of UCC!The 2017-2026 strategy of the Partnership development is identified as the goal for the

Company to join the Top 5 chemical and petrochemical companies of the Customs Union before 2026. In 2017 the Company performed significant work aimed at improvement of the current business processes, corporate governance, enhancement of financial results, and, thus, increase of the company’s value.

Considerable results in implementation of the current investment projects have been achieved. Among the most significant events related to the investment projects being implemented, the following should be mentioned:

commencement of financing and conclusion of the PMC-contract between KPI Inc. LLP and CB&I for the management of the project named Construction of an Integrated Gas Chemical Complex in Atyrau region – Phase I (polypropylene),

conclusion of the ЕРС-contract for the Caustic Soda and Chlorine Production project; opening of Zavodskaya railway station, with participation of the executives of Atyrau

branch of Kazakhstan temir zholy–Freight transportation JSC, corporate members of SEZ NIPT and other officials.

Making no stops on the results achieved, UCC constantly expands the fields of its activities: within the framework of trade and economic cooperation between the Republic of Kazakhstan and the Republic of Uzbekistan, a joint venture named Kazakh-Uzbek Trade House Neftekhim Trading LLP was established.

At the same time, there still remains much to be done for the purpose of execution of the plans shaped with regard to implementation of both running and prospective investment projects, and achievement of better financial results.

Work aimed at improvement of corporate governance will be continued in accordance with the accepted global standards in order to increase the value and investment attractiveness of the company.

Aydarbayev Alik Serikovich

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SPEECH BY THE CHAIRMAN OF THE BOARD

Dear partners and colleagues, Welcome to the pages of our UCC Annual Report. I am glad to present our second Annual

Report including the sustainable development report for the period from 1 January to 31 December 2017.

We continue familiarizing our employees, government bodies, suppliers and other interested parties with our approach to the issue of sustainable development for successful and long-term development of business. We aim at transparency, provision of reliable information about the most significant aspects of our company’s sustainable development activities, as well as our achievements and the challenges that we will have deal with.

During 2017 there were a number of important events: we continue to ramp up the strategic potential through consistent movement along the

previously planned path of building oil and gas chemistry in Kazakhstan and monetizing the advantage of our raw materials, accumulating experience and competencies, and forming strategic partnerships. We understand that attaining our vision of becoming one of the five largest chemical and petrochemical companies of the Customs Union is a non-linear and iterative process. Therefore, we assess our progress, weigh each subsequent step and plan to update our strategy in 2018;

within the framework of trade and economic cooperation between the Republic of Kazakhstan and the Republic of Uzbekistan, a joint venture named Kazakh-Uzbek Trade House Neftekhim Trading LLP was established;

a PMC-contract between KPI Inc. LLP and CB&I was concluded for the management of the project named Construction of an Integrated Gas Chemical Complex in Atyrau region – Phase I (polypropylene);

2 new participants were registered on the premises of SEZ ChemPark Taraz; the ceremony of Zavodskaya railway station opening was held with participation of the

executives of Atyrau branch of Kazakhstan temir zholy–Freight transportation JSC, corporate members of SEZ NIPT and other officials;

the target organizational structure of the Partnership developed in accordance with the new UCC development strategy for 2017-2026 was approved;

we also continue investing in the programs aimed at assistance to professional growth and development of talented employees;

the rating agency named Expert RA Kazakhstan conducted an independent assessment of the quality of annual reports of Kazakhstan companies, according to which the UCC Annual Report reached the second position in the rating of 100 best annual reports for 2016 (based on content), thus having entered the list of leaders. The authors of the rating noted the high level of preparation and good informational content of the UCC report.

We continue working on implementation of corporate governance, which is a priority task for UCC, as implementation of corporate governance principles in accordance with the accepted global standards is crucial for enhancement of investment attractiveness of the company. UCC corporate governance is based on efficiency, operational capability and transparency.

Furthermore, we would be grateful for good feedback from those to whom we address our report, as this would help us obtain most complete and fair view of our role in society.

Oserbay Zhenis Alibekuly

1. ABOUT COMPANY

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1.1. GENERAL

United Chemical Company LLP (hereinafter referred to as UCC) was established on 22 January 2009 based on the decision of the Board of Directors of Sovereign Wealth Fund Samruk-Kazyna Joint-Stock Company, dated 28 November 2008, in the form of a limited liability partnership.

UCC is an operator in petrochemical industry development in Kazakhstan aimed at provision of diversification, modernization, and sustainable development of the country’s petrochemical and chemical sector through attracting investment and supporting small and medium-sized businesses.

The founder and the Sole Participant of UCC is Samruk-Kazyna JSC.The paid-up charter capital of UCC as of 31 December 2017 is 260 693 547 600 tenge.In 2017 there were no significant changes in the scale and ownership structure in UCC.The tasks for UCC are as follows: development and implementation of investment projects in chemical industry; effective management of assets owned by UCC based on proprietary right or trust

management.The scope of UCC’s activity is as follows: arrange and carry out research, expertise and other works required for implementation

of investment projects in chemical industry; organize and implement projects related to the use of subsurface resources required for

organization of investment projects in chemical industry; UCC’s participation in creation and (or) acquisition of shares (shares of participation) of

other legal entities for implementation of investment projects in chemical industry with the possibility of subsequent UCC’s carve-out of shares (shares of participation) in such legal entity;

introduction of corporate governance best world practice for legal entities whose more than fifty percent of voting shares (participatory interests) belong to UCC based on proprietary right or trust management to ensure effective management for them.

In 2011 UCC obtained the status of an associated company of the Cefic Council. The Council represents the interests of more than 29 000 European chemical companies having 1.2 million employees and producing one-third of global chemical products worth more than 450 billion Euros per year.

Obtaining the status of a Cefic associated company provides UCC with an access to information about current trends in chemical industry development, to foreign countries’ experience in stimulating sustainable development of chemical enterprises, standards for safe chemical product production and use, statistical and analytical materials, which allows us to be aware of the latest trends in European chemical industry, including the REACH regulation, Responsible Care programme, and other.

With a view to effective strategic partnership and cooperation in promoting the interests of chemical industry, UCC is a member of the National Chamber of Entrepreneurs of the Republic of Kazakhstan named Atameken (hereinafter referred to as NCE Atameken). NCE Atameken represents the interests of small, medium and large businesses and covers all areas of entrepreneurship including domestic and foreign trade. The main goal of NCE Atameken is to protect the rights and interests of businesses and ensure the wide coverage and involvement of all entrepreneurs in the process of creation of legislative and other regulatory rules for business activities. The activity of NCE Atameken is aimed at improvement of business investment environment, stability, development of business climate in the country, both for national and foreign investors. The main functions of NCE Atameken are as follows:

representation and protection of legitimate interests and rights of entrepreneurs; conducting public monitoring of entrepreneurial activity and conditions for

entrepreneurial activity in different regions; participation in state programs for entrepreneurship development and support;

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supporting domestic production and increasing the share of local content in procurement;

training, retraining, advanced training, qualification and certification of personnel, development of technical and vocational education;

stimulation of foreign economic activity of business entities; attracting investments, and economy diversification.Moreover, NCE Atameken stands for the active involvement of Kazakhstan’s businesses in

the implementation of state programs. It protects the interests of business circles in government bodies and local self-government, extends and strengthens links with the business community of foreign countries, and also supports the Kazakhstan business within the framework of integration processes.

UCC is also a member of the industrial Association of Legal Entities named Kazakhstan Association of Oil-Gas and Energy Complex KAZENERGY (hereinafter referred to as KAZENERGY Association). The aim of KAZENERGY Association is as follows:

protection of rights and interests of the members of the Association in state bodies, and harmonization of legislative framework;

creation of a single information field for subsoil users, electricity producers, transporters and consumers of the energy sector products and services;

development and support of intra-sectoral cooperation and entrepreneurship projects at local, regional and international levels;

dissemination of the positive image of the Association, its members and the industry as a whole, at regional and global levels;

stimulation of economic, social, ecological, and scientific and technical activity of society in Kazakhstan.

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1.2. GROUP STRUCTURE

UCC operates on the territory of the Republic of Kazakhstan. The asset portfolio of UCC includes 11 subsidiaries and associated companies (9 subsidiaries, 1 jointly-controlled entity and 1 associated company). The structure of UCC’s assets has 4 levels of management, including the Sole Participant of UCC.

Structure of UCC assets

* Among the specified subsidiaries and associated companies, Polymer Production LLP is the second participant owning 0.1%.

The investment portfolio of UCC contains 11 projects including 2 infrastructure projects: creation of regional infrastructure for SEZ ChemPark Taraz and creation of industrial and plant infrastructure of SEZ NIPT.

Information about UCC’s subsidiaries and associated companies

Name of subsidiary or associated company Main purpose of activity Participants

JV SAP Kazatomprom LLP Production of commercial sulfuric acid United Chemical Company LLP – 90.11%;

SAP Kazatomprom JSC – 9.89%KPI Inc. LLP Construction of an integrated gas

chemical complex in Atyrau region, infrastructure facilities for the project, and a pipeline for supplying gas from the production facilities of Tengizchevroil LLP

United Chemical Company LLP – 51%;

Firm Almex Plus LLP – 49%

Polymer Production LLP Implementation of the investment project named Polymer Product Manufacture in Atyrau region

United Chemical Company LLP – 99.78%;

Propylene Pack LLP – 0.22%HIM-Plus LLP Implementation of the investment

projects: Glyphosate (Herbicide) Production, Caustic Soda and Chlorine Production and Phosphorus Trichloride Production

United Chemical Company LLP – 99.87%;

Samruk-Kazyna Invest LLP – 0.13%

MC SEZ ChemPark Taraz JSC Organization and development of SEZ ChemPark Taraz

Founder (Sole Shareholder) MC SEZ ChemPark Taraz JSC – United Chemical Company LLP – 100%

MC SEZ NIPT JSC Management and support of SEZ NIPT in accordance with the Law on SEZ

United Chemical Company LLP – 9.22%;

Ministry of Energy of the Republic of Kazakhstan – 90.78%

Karabatan Utilities Solutions LLP

Construction of infrastructure facilities of the special economic zone named National Industrial Petrochemical Technopark in Atyrau region: gas turbine power plant (hereinafter

referred to as GTPP) to supply electricity and high-pressure steam to investment strategic projects on the territory of SEZ NIPT;

unit for production of compressed air and nitrogen (hereinafter referred to as Techgases) to supply compressed air, instrumentation air and nitrogen, for investment projects on the territory of SEZ NIPT;

water treatment and wastewater treatment unit (hereinafter referred to as WT) to provide compressed air, instrumentation air and nitrogen for investment projects on the territory of SEZ NIPT;

220 kV overhead circuit and substation to provide SEZ NIPT participants with backup power

United Chemical Company LLP – 99.9%;

Polymer Production LLP – 0.1%

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sources, belonging to 1 safety category objects

KLPE LLP Construction of an Integrated Gas Chemical Complex in Atyrau region – Phase 2 (polyethylene), production and sale of polyethylene and other manufactured industrial products, including gas processing and petrochemical products

United Chemical Company LLP – 99.9%;

Polymer Production LLP – 0.1%.

PVH Development LLP Development and implementation of projects for construction and development of petrochemical plants for hydrocarbon raw material processing and petrochemical product manufacture, including production of vinyl chloride polymers. Petrochemical product sale

United Chemical Company LLP – 99.9%;

Polymer Production LLP – 0.1%.

Butadiene LLP Implementation of investment project named Production of Butadiene and Synthetic Rubbers: Production of Butadiene – Phase I»

United Chemical Company LLP – 99.9%;

Polymer Production LLP – 0.1%.

Kazakh-Uzbek Trade House Neftekhim Trading LLP

Purchase and sale of petroleum, chemical, petrochemical, agrochemical products

United Chemical Company LLP - 49%;

Uzkimyosanoat JSC - 17%; O`ZSANOATEKSPORT JSC -

17%; NHC Uzbekneftegaz JSC - 17%.

The actual number of personnel of the UCC Group during the reporting period was 953 people including the production personnel accounting for 600 people and the office and management personnel accounting for 353 people.

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1.3. BUSINESS MODEL

Petroleum chemistry is the sector linking hydrocarbon raw materials with consumer goods

Note:Copolymers – bound monomers;Composites – multicomponent materials consisting of a matrix of chemically dissimilar components;BTX – benzene, toluene and other aromatic compounds; PE – polyethylene; PP – polypropylene; PS – polystyrene; PVC – polyvinyl chloride; PET – polyethylene terephthalate; ABS - acrylonitrile butadiene styrene; PU - polyurethane; PA - polyamide; PMMP-polymer of methyl methacrylate.

Inorganic and special chemistry is a sector linking mineral raw materials with consumer and investment goods

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2. MANAGEMENT REPORT

2.1. MARKET REVIEW AND SECTOR PERFORMANCE

Chemistry is everywhere and naturally in everything around us, from air and water to products and processes we use every day, even our own living tissue is chemistry in motion. Chemistry turns over 275 million tons of natural raw materials derived from land, sea and air into products that we use every day. Innovations in chemistry have created countless economic and social benefits: a longer and healthier life thanks to medical achievements; improvement of living conditions from fertilizers and water treatment; and instant access to information from anywhere thanks to smartphones and other smart devices. Chemistry is essential for our daily lives. Manufactured fibers and permanent clothing, life-saving appliances, agricultural products with improved technology, advanced food products, protective packaging materials, longer lasting dyes, stronger adhesives, smaller and faster processors, stronger and safer tyres, light car parts and stronger composite materials on airplanes and space vehicles are only a few products among thousands of innovative products of chemistry. More than 96% of all industrial commodities are directly affected by chemistry, either as material or during processing.

Chemistry has significant influence on products and services that consumers and industries use in their daily activities. Below is a list of only a few of the many life-enhancing products that became possible due to chemistry:

An AUTOMOBILE contains chemistry for more than 3000 USD including more than 150 kg of plastics and polymers as well as more than 122 kg of rubber, textiles and coatings2. Modern plastics and polymer composites usually make up 50% of the volume of a new light vehicle, but less than 10% of its weight, which helps to make cars more lightweight and more economical resulting in lower greenhouse gas emissions. Modern plastics and polymer composites also help enhance passenger safety, and car designers rely on the versatility of plastics and polymer

2Chemistry and Light Vehicles, ACC’s Economics & Statistics department (August 2016)

composites when designing modern cars. An analysis by the US Department of Energy suggests an 6-8% increase in fuel economy per each 10% weight reduction3.

SMARTPHONES. Today, every third person on planet has a smartphone, and by 2020 this figure will double4. Compared to the mobile phones of the 90s, modern smart devices provide quick access to the Internet, photo- and video-editing, streaming terrestrial TV, music, books and fitness trackers, and many other advantages. You can even use your phone to pay for products. All of this is possible due to chemistry which is used to create electronic circuits that make it all feasible. Plastics provide high impact resistance, strength and durability, necessary to protect the device. Thanks to chemistry, global communications become accessible and more accessible than ever before.

MEDICAL DEVICES AND EQUIPMENT. Modern medicine is impossible without chemistry. Chemistry is used in many types of medical devices and equipment: polyurethanes are commonly used in a number of medical applications, including a catheter tube, stationary bedding, surgical drapes, wound dressings, as well as in various pressure injection devices; ethylene oxide is used for sterilizing medical supplies; PVC is used for medical blood and intravenous bags and tubes, as well as to protect wires and cables in modern diagnostic equipment. Due to high impact resistance and transparency, polycarbonate is used for a number of medical applications including syringes, surgical instruments, kidney dialysis filters. Carbon chemistry is used to produce synthetic diamonds for highly precise surgical knives. Synthetic latex gloves, sutures, surgical dressings, bandages, therapeutic whirlpool tubs and hundreds of other modern healthcare wonders are now possible thanks to chemistry.

RENEWABLE ENERGY AND ENERGY EFFICIENCY. Chemistry is an important component for renewable energy technologies and energy efficiency. Wind energy blades are manufactured with plastics such as polyurethane, epoxy and / or unsaturated polyester resins reinforced with carbon fibers, which assist in delivering renewable energy sources to the electric network. Building insulation saves up to 40 times the energy used to produce it; plastic wrap that forms a weather-resistant barrier saves up to 360 times the energy used to produce it. Compact fluorescent lamps (CFL) that use phosphorus compounds and small printed circuit boards (encapsulating resins, etc.) consume 70% less energy than incandescent lamps. Chemistry helps consumers save money and reduces overall energy consumption.

LITHIUM BATTERIES are crucial for modern life as they are used in consumer electronics to cardiac pacemakers and automobiles. Strength and size of lithium batteries make them a perfect choice for consumers: they are used in our smartphones and tablets; they supply energy to cordless drills and flashlights. On a large scale, lithium batteries are used to power anything from wheelchairs to hybrid cars to jet fighters and satellites.

CLOTHES. Chemistry helps to make clothes better and safer for the gym, construction site or office. Chemistry is able to protect workers from hazardous materials such as lead and asbestos; hard hats are made of high-density polyethylene or other resins. Polyurethane-covered fabrics are durable and wear-resistant; nanotechnology enables clothes to resist stains, add UV protection and even offer antibacterial properties. High-performance fibers made from aromatic polyamides are used for the production of bullet-proof vests. Thanks to chemistry, we are better protected, we are cleaner and we even smell better.

PHARMACEUTICS plays the key role for human health and well-being while chemistry is the centerpiece to pharmaceuticals. Chlorine production is estimated to be essential for the production of at least 88% of prescription pharmaceuticals; moreover, chlorine is present in about 25% of all ready-to-use pharmaceutical products5. Drug innovations have enabled people to live and control the diseases that used to be death sentences (for example, diabetes, HIV/AIDS), and have reduced and eradicated diseases in the entire world (such as smallpox and polio). Presently scientists are studying ways of nanotechnology and nanoparticle use to combat 3http://energy.gov/articles/545-mpg-and-beyond-materials-lighten-load-fuel-economy 4http://www.ericsson.com/res/docs/2015/mobility-report/ericsson-mobility-report-nov-2015.pdf 5https://chlorine.americanchemistry.com/Pharmaceuticals/

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many diseases including cancer and Ebola. The analysis at Columbia Business School showed that one-time investment in R&D amounting 15 billion USD subsequently saves 1.6 million man-years every year. Chemistry enables people to obtain a healthier, more productive, more enjoyable and longer lasting life.

KITCHEN APPLIANCES. When it comes to the possibility of having a cold drink from refrigerator or microwave food in a few minutes, most people today take if for granted. 100 years ago food products were stored in cellars or were not stored at all; now almost every house has a refrigerator. Modern cooling being possible through the use of hydrochlorofluorocarbons ensures safer and longer storage of food and allows transporting food products over a much longer distance. A microwave oven might be one of the deepest innovations in the last half of the century; the ease of heating food in the microwave oven contributed to a revolution in restaurants. The microwave oven electronics became feasible thanks to the chemical composition of silicon, as well as other chemistry used to create electric circuits, cable and wiring protection, plastics in which microwave ovens are placed, and polysulfone polymers resistant to heat, fats, oils and other elements . Chemistry has fundamentally changed our kitchen habits.

Analysis of global trends and prospects for chemical industrySince the 1970s the growing demand for chemical-based products and processes has

caused a global boom in chemical industry. In 1970 world production of chemicals (produced and supplied) accounted for 171 billion USD. In 2016 it rose to 5.2 trillion USD6.

Fig. Dynamics of chemical consumption, bln. USD 7

After the rapid growth in the 90s-2000s, chemical industry entered its maturity phase and during the last 5 years it only grew by 5.8%. A notable growth is only observed in the segments of polymer production and new and advanced material creation.

6https://www.statista.com/statistics/302081/revenue-of-global-chemical-industry/ 7www.statista.com

20

Fig. Dynamics of world supply of chemicals shown by segments, bln. USD8

In 2016, the segment of basic chemicals including inorganic substances, basic petrochemicals, rubber and resins made up the majority of the world chemical freights and in total accounted for more than 2.1 trillion USD. Pharmaceuticals and agricultural chemical products amounted to 1.3 trillion USD and 450 billion USD, respectively.

One of the main trends in chemical industry is the continued increase in production output and capacity in China, India and South-East Asian countries, which is due to increased product consumption in these regions, as well as gas- and petrochemical capacity growth in the Middle East and CIS due to cheap raw materials.

Fig. Volume of chemical sales in 2016 shown by regions, bln. USD9

In 2009, Asia accounted for about 41% of the global chemical market share, in 2016 the share reached 54%. During the time, the industry share in Europe and NAFTA in the industry fell to about 17% and 18%, respectively.

8www.statista.com 9www.statista.com

21

China continues to pursue the ambitious industrial development strategy of movement from a big country to a great power in petroleum and chemical industry. In 10 years China’s share in the total world market volume tripled and amounted to 40% of global sales, which is 1.5 times higher than the total sales of the following four major chemical producers: the USA, Germany, Japan and South Korea, and as much as in the markets of NAFTA and the EU together. At the same time, in comparison with the dynamics of the world market, the growth of Chinese market accounted for 4% compared to 2015.

Fig. Dynamics of chemical product market shown by regions and countries10

According to A.T. Kearney, if current trends continue, then 30% of jobs in the European chemical industry will be lost by 2030. Today, 12 of the top 30 largest producers that control 91% of the global market are Asian, and by 2030 their share account for 2/3 of the market.

In general, the tertiary decline in Europe and the slowdown in China’s growth will affect the chemical market growth rate. The most dynamic achievements will be observed in the developing countries of the Asian-Pacific region, Africa and Middle East. A growth is expected in North America due to development of shale gas production. Given the long-term structural problems and declining competitiveness, the development rate in Western Europe and Japan will lag behind the world pace.

Fig. Chemical production growth forecast by regions, % to previous year11

10 Cefic:Facts&Figures 2017 11American Chemistry Council: Economics&Statistics

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Fig. Production growth forecast by segments, % to previous year 12

Chemical and petrochemical industry development in Kazakhstan Kazakhstan possesses huge stocks of mineral and hydrocarbon raw materials and ranks

among the top 15 leading countries of the world. In view of this, chemical industry has a huge potential for growth.

Chemical industry development is one of the key targets given the state programs for industrial development in 2010-2014 and 2015-2019.

According to the data of the Statistics Committee for the period of January-December 2017 there is an increase in volume index by 6.2% compared to the same period in 2016, in value terms the production grew by 7.2%.

Fig. Dynamics of chemical industry production 13

The production growth in physical terms shows the following: phosphorus fertilizers by 78%, nitrogen fertilizers by 7%, caustic soda by 7%, sulfuric acid by 9%, polymers of styrene in primary forms by 13%, ammonia by 4%.

12 American Chemistry Council: Economics&Statistics 13Kazakhstan Industry Development Institute

23

Fig. Comparison of production volumes of some types of chemical products 14

According to the operative data of the Statistics Committee and the State Revenue Committee, for 12 months of 2017 the export of chemical products declined by 2.7% compared to 2016.

The greatest growth was demonstrated by the export of mineral fertilizers that in value terms increased 2.4 times. The major markets for sale are Ukraine, Argentina, China and Lithuania.

Fig. Dynamics of chemical product export, mln. USD15

Table Structure of chemical product export in KazakhstanProduct Thousand

USD2017/2016 Ton 2017/2016 Export share,

%Phosphorus 180 995.9 +29.0% 72 630.7 +42.7% 29.6%Other oxides and chromium chlorides 74 408.9 +56.5% 36 017.0 +10.4% 12.2%

Mineral fertilizers: N and P 45 936.2 + в 2.4 р. 185 750.6 + в 2.6 р. 7.5%

Other silicon 30 637.9 -2.4% 22 821.9 +3.0% 5.0%Ammonium nitrate 28 372.4 + в 2.4 р. 134 043.2 + в 2.4 р. 4.6%Chromium trioxide 27 685.0 +21.9% 14 696.3 -5.5% 4.5%

14Kazakhstan Industry Development Institute15Kazakhstan Industry Development Institute

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Polypropylene 21 826.5 +17.9% 36 658.3 + в 2.1 р. 3.6%Sodium dichromate 18 298.5 -2.4% 17 336.0 -24.5% 3.0%Calcium carbides 14 262.8 -6.2% 21 768.1 -10.9% 2.3%Acyclic saturated hydrocarbons 10 836.6 -20.7% 52 448.4 -19.1% 1.8%

The same period import in value terms increased by 30% compared to 2016.

Fig. Dynamics of chemical product export, mln. USD 16

Table Structure of chemical product export in KazakhstanProduct Thousand

USD2017/2016 Ton 2017/2016 Export share,

%Herbicides 148 235.8 + в 1.3 р. 19 421.2 +55.9% 6.2%Polyethylene having specific weight of 0.94 or more

120 382.1 +6.1% 96 108.5 +17.2% 5.0%

Surface-active agents, washing, cleaning 112 943.5 +27.7% 104 030.3 +16.4% 4.7%

Disodium carbonate 87 444.0 +19.5% 350 495.5 +5.9% 3.6%Ready-to-use binders for casting mold production 82 433.6 - 17 509.1 - 3.4%Other cosmetic products

63 508.6 +17.4% 7 793.7 +1.7% 2.6%Diagnostic or laboratory reagents 51 743.9 +10.4% 1 555.9 -0.7% 2.2%Mixtures of fragrant substances 47 819.5 +28.8% 2 520.2 +13.0% 2.0%

Polyvinyl chloride 41 125.5 +5.8% 50 475.6 -3.8% 1.7%Ammonium nitrate including in aqueous solution

40 204.1 +28.7 209 141.6 +34.0% 1.7%

2.2. UCC DEVELOPMENT STRATEGY

In 2017 the Supervisory Board approved the long-term UCC Strategy until 2026. The progress towards the goals is measured annually using 8 key performance indicators, and risk control is performed within the framework of the company’s risk management system.

The 2017-2026 development strategy for UCC is based on monetization of the available petrochemical raw materials using the business model of a large-capacity producer of basic polymers. At the same time, UCC intends to accumulate the necessary competencies in management of large projects for industrial capital construction, in marketing and sales, and development of innovations. In the next decade UCC’s activity will be focused on creation of global scale gas- and petrochemical and gas-processing complexes in Kazakhstan. Thus, the company intends to lay financial and expert basis for consistent entry into the highly competitive and specialized special chemistry sector in the next phase of development – after 2026.

Within the rapidly changing environment the Strategy is dedicated to become a desktop document for managers to use it daily to make informed decisions. If necessary the Strategy may

16Kazakhstan Industry Development Institute25

be updated with regard to significant changes in the external or internal environment of the company. Nevertheless, the ultimate goal of the Strategy remains the creation of competitive chemical production entities in Kazakhstan and the growth of the long-term value for the Sole Participant.

The investment program of UCC for the period up to 2026 is about 10 billion USD. The attractiveness of UCC’s projects is based on the availability of raw materials and favorable location of the projects in special economic zones (SEZ) in the west and south of Kazakhstan. The current activity of UCC is focused on gas- and petrochemical industry and agrochemistry, creation of the SEZ infrastructure, and driving the plants launched in 2015 for polymer product and sulfuric acid production to their full output.

Our missionWe produce high quality chemical products, which contributes to rational use of natural

resources and to transition of Kazakhstan’s economy to new technologies with higher added value. We create a new industry and value for all interested parties.

Our visionA recognized leader in chemical industry of the Republic of Kazakhstan, a profitable

company and one the top 5 largest petrochemical companies of the Customs Union in terms of volume of sales by 2026.

Strategic development directions1. Monetization of raw material advantage – establishment of large-scale petrochemical

production;2. Accumulation of experience in agrochemistry and special chemistry – implementation of

niche projects in industries with high added value, and import substitution in the markets of Kazakhstan and the Russian Federation;

3. Development of missing competencies for the formation of new competitive strengths and access to more narrowly-focused special product chains.

In accordance with our development directions, mission and vision, 5 clear strategic targets were formulated:

Strategic targets

Priorities set in 2017 Progress in 2017 Priorities set for 2018

Development of effective business in the field of cluster gas- and petroleum chemistry based on raw material advantage and entry into the Top-5 petrochemical companies of CU

Project: Construction of an Integrated Gas Chemical Complex in Atyrau region. Phase 1 (polypropylene) – preparatory work during the design and construction period and negotiations on tariffs for water supply from KUS LLP, mobilization of the project team, PMC-consultant and EPC-contractor, negotiations on the supply of additional raw materials, consideration of an alternative source of raw materials, joint operation with the licensor, contractor and the customer for the analysis of key units for the possibility of increasing

Project: Construction of an Integrated Gas Chemical Complex in Atyrau region. Phase 1 (polypropylene) – in November 2017, the EPC-contractor was given notice to proceed (NTP), which indicates the beginning of the active phase of the project. The PMC-consultant (CB & I Europe B.V.) was selected, and the project management services contract was signed in February 2017. Within the Ministry of Energy of the Republic of Kazakhstan, a working group was formed including NCOC contracting organizations. Negotiations within the working group were held regarding the volume and composition of gas, and technical aspects of supplies.

Mobilization of the project team, detailed engineering, ordering long-lead equipment, and commencement of construction and erection works, signing of binding agreements with KUS LLP on water tariffs, resolving the issue of raw materials for reaching the estimated capacity, consideration of the issue of increasing the project’s capacity, searching for a strategic partner for the project: Construction of an Integrated Gas Chemical Complex in Atyrau region. Phase 1 (polypropylene)»; Signing the financing

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the project capacity; Project: Construction of an Integrated Gas Chemical Complex in Atyrau region. Phase 2 (polyethylene)» - configuration selection and approval of the project implementation concept, identification of potential developer of FEED-documentation; Project: Establishment of ammonia and methanol production – pre-project technical study, technology selection, licensing agreement, detailed market analysis, regulatory environment, risk assessment, contract strategy development, agreeing terms of supply of raw materials and energy resources; Project: Establishment of a world-scale complex for associated gas processing – pre-project consideration (selection of technology, contractor for FEED-documentation development) and making a decision about transition to the stage of project scope definition.

Water requirements and tariffs were preliminarily agreed between KPI Inc. LLP and KUS LLP as part of harmonization of financial models for these projects. Negotiations between KPI Inc. LLP, KUS LLP and KTO were held in order to conclude binding agreements including the agreements reached and the pricing formula (tariffs). Project: Construction of an Integrated Gas Chemical Complex in Atyrau region. Phase 2 (polyethylene) – in September 2017, based on the jointly developed preliminary feasibility study, a potential partner made a positive decision about participation in the project, a preliminary project configuration was determined; Project: Establishment of ammonia and methanol production – a preliminary feasibility study was developed, results considered and approved by the corporate bodies of UCC and the Fund, a pool of potential partners was created, a series of negotiations was held with partners from China, Russia and Malaysia, further steps of cooperation were identified, as part of the gas issues work was performed with the Ministry of Energy, KMG, Kaztransgaz regarding special conditions for gas price; Project: Establishment of a world-scale complex for associated gas processing was suspended, as all available raw materials were redirected to increase the capacity of the Project: Construction of an Integrated Gas Chemical Complex in Atyrau region. Phase 2 (polyethylene); Infrastructure projects – main equipment of a gas turbine power station (GTPP)

general terms and conditions agreement (term-sheet), and establishment of a joint project venture (SPV) with a potential partner, feasibility study of the project: Construction of an Integrated Gas Chemical Complex in Atyrau region. Phase 2 (polyethylene)»; Identification of the partner and implementation scheme for the project named Establishment of ammonia and methanol production; Completion of infrastructure construction for SEZ Chemical Park Taraz, continuation of technical infrastructure construction for SEZ NIPT (GTPP, water treatment, technical gases).

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was installed, design and estimate documentation was received and construction and erection works of the infrastructure of SEZ Chemical Park Taraz was started, financing issueswere resolved.

Entrance to the market segments of agrochemistryand special. chemistry for diversificationof the portfolio

Project: Establishment of glyphosate and phosphorus trichloride production – commencement of formulation shop construction (design and estimate documentation, ordering equipment, construction and erection works). Project: Caustic Soda and Chlorine Production» - financial closure, selection of EPC-contractor, start of construction and erection works.

Project: Establishment of glyphosate and phosphorus trichloride production –construction of the 1st and the 2nd start-up complex was finished, construction and erection of the 3rd start-up complex was commenced, design and estimate documentation for the 4th start-up complex. Project: Caustic Soda and Chlorine Production – in June 2017 a loan agreement was signed between HIM-Plus LLP and CDB for the amount of 100 million USD for a period of 10 years at 4.7% per annum. EPC-contract was signed with the consortium including Kulager CC LLP (leader) , Chemieanlagenbau Chemnitz GmbH (Germany), Promstroiproyekt Project Institute LLP, Aral-Service LLP. Project: Organization of peroxide oxygen production in Kazakhstan – A site for the project implementation was selected, a potential project partner started developing preliminary feasibility study, negotiations with the project participants and with participation of the Ministry of Investments and Development of the Republic of Kazakhstan were held with regard to the issues of concluding off-take contracts and using hydrogen peroxide in underground leaching of uranium.

Project: Establishment of glyphosate and phosphorus trichloride production – launch of the 2-nd start-up complex (formulation shop for production of glyphosate-containing herbicides), completion of the third start-up complex construction, obtaining the conclusion by the State Expertise, commencement of the 4th start-up complex construction. Project: Caustic Soda and Chlorine Production – Continuation of construction and erection works. Project: Organization of peroxide oxygen production in Kazakhstan - completion of preliminary feasibility study of the project, signing of a preliminary agreement between UCC and a potential partner, including the obligations of the parties regarding development of a feasibility study for the project, approval of the Roadmap for the project implementation, main conditions for establishment of a joint venture, as well as possibilities of concluding off-take contracts and using

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hydrogen peroxide in natural uranium mining.

Increasing the efficiency of capital construction and developing the large capital project management function

Formation of a project office and commencement of work on implementation of the system and construction of the process for large capital project management.

The existing large capital project management competencies were assessed within the framework of Job Matching. The staff schedule of UCC defined the quantitative requirements for the personnel of the Capital Project Management Center. New qualification requirements for CEO-1 level positions and CEO-2 key positions in the Capital Project Management Center were developed and agreed upon.

After introduction of a new organizational structure and completion of formalization of all methodological aspects, large capital project management system shall be implemented on a full-scale with Samruk-Kazyna JSC serving as an example.

Creation of sustainable competitiveadvantages in the field ofintellectual property

Introduction of innovation management system, building of innovation portfolio;

In accordance with the new organizational structure, the innovation management system implementation functionality is defined in the Business Development Unit. Implementation of the investment project named Organization of the laboratory and analytical complex was started.The project proposes organization of a laboratory-analytical complex on the basis of Nazarbayev University JSC for the following purposes: (1) toxicological assessment of agrochemical products (pesticides, fertilizers) according to GLP (good laboratory practice) standards, (2) determination and monitoring of persistent organic pollutants, and (3) utilization of spent catalytic cracking catalysts).

Continuation of implementation of the project named Organization of a Laboratory and Analytical Complex.

Creation of a full-fledged sales network on the global market and enhancement ofmarketing functions

Marketing policy updating for started production.

A value creation plan (VCP-plan) was drawn up by SAPK, including measures on fulfillment of the sales standard, and measures aimed at increasing the plant’s utilization rate are taken. The VCP-plan of Polymer Production is at the stage of development. In February 2017, as part of the expansion of the trade and

Implementation of VCP-plans and commencement of loss-free operation of the started production. Registration of the Trade House as a qualified supplier for GWS Samruk-Kazyna JSC, development of the export potential of Kazakhstan goods to

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economic cooperation between the Republic of Kazakhstan and the Republic of Uzbekistan, a joint venture named Kazakh-Uzbek Trade House Neftekhim Trading LLP was established jointly with Uzbek party, with UCC’s share in the charter capital accounting for 49% was established. In December 2017 the Trade House supplied the first batch of ammonium nitrate to the Kazakhstan company.

Uzbekistan (construction bitumen, BOPP film, etc.), formation of a trade team of specialists, organization of strategic consignment warehouses (South-North), expansion of the line of trade positions through strategic partnership with major consumers in the Republic of Kazakhstan.

OUR PROGRESSThe company performs monitoring of the results of activity using 8 key performance

indicators enabling evaluation of achievement of the tasks that were set. All UCC key performance indicators meet the requirements of SMART principles: strategic value and relevance, measurability, simplicity, applicability, accuracy. The target values of the strategic key performance indicators are set for each year, reflect the company’s ambitious vision, and have direct influence on the amount of top management remuneration.

The major part of the KPI is integrated from the tree of the Fund’s KPI, which arises from the requirements of the Fund’s normative documents to ensure a clear correlation with the Fund’s strategic KPI. The rest of the KPI were accepted in order to ensure achievement of the company’s strategic goals. The method for calculation of the company’s strategic KPI corresponds to the Methodological recommendations for calculating the key performance indicators of the Fund (approved by the decision of the Board of the Fund on 12 April 2017), the Methodology for diagnosing corporate governance in legal entities in which more than fifty percent of voting shares are directly or indirectly owned by the Fund (approved by the decision of the Board of the Fund on 26 September 2016), the Policy of Debt Management and Financial Stability of the Fund (new edition approved by the decision of the Board of Directors of the Fund on 27 January 2017).

KPI Topicality Method of measurementTarget

value in 2026

Plan for 2017

Results for 2017

Economic value added

KPI makes assessment of how much economic value was created by the Partnership for the Sole Participant, and reflects the overall efficiency of the Partnership's operating activity. The cost created due to projects in agrochemistry and special chemistry is singled out within EVA to emphasize their commensurate

UCC EVA = EVA of Subsidiaries and Associated Companies + EVA of Joint and Associated Companies * Owned share.

EVA = (ROIC - WACC) * IC = NOPLAT - WACC*IC where:

ROIC = NOPLAT/IC;

NOPLAT (Net Operating Profit Less Adjusted Tax or operating profit adjusted for income tax) = (Gross profit - GAE – Shipping costs and

$ 1305 mln.

$ - 82 mln.

$ - 75 mln.The main impact on the actual value of this KPI was by improvement of NOPLAT due to the transfer of a part

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strategic importance for the Partnership, despite the small amount of their contribution to the overall EVA compared with gas- and petrochemical projects. In calculation of consolidated EVA of the Partnership, the EVA of all projects being implemented by the Partnership are taken into account, with an adjustment for its own share in these projects.

selling expenses +/- Diminution of value/asset recovery)*(1-CIT Rate);

IC (Invested Capital) = Assets – Non-Operating Assets – Operational covenants; or borrowed capital + Owned capital – Non-Operating Assets.

WACC – weighted average capital cost.

of the general and administrative expenses for subsequent periods.

Net asset value

KPI allows calculating the value of the net assets provided with own capital of the Partnership.

NAV = (Assets – Obligations – Non-controlling participation share)n + [(Dividends, added + Other allocations to the Shareholder/ Government – Discount for loans from Government or Shareholder – Contribution to charter capital from Shareholder/ Government) * for the share of the Shareholder] cumulative since

2015.

$ 7 152 mln.

$ 209 mln.

$ 336 mln.Improvement of the actual financial result due to the revaluation of the share of UCC (51%) in the charter capital of KPI Inc. LLP had a positive impact on this indicator.

Free cash for development and dividends

KPI determines the capability of the operating activity of the Partnership to provide the profit available for allocation to the Sole Participant, covering debt obligations, and investment activity.

SDSRD = Net operating cash flow - Capital expenses for maintaining the efficiency of administrative and production assets without VAT according to the cash basis method

$ 2 364 mln.

$ -30 mln.

$ -24 mln.The improvement in KPI was mainly affected by the reduction in

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interest payments for borrowed loans due to the later development of the loan of CDB under the project of KPI Inc. LLP, as well as the transfer of a part of the general and administrative expenses onto subsequent periods.

Corporate governance score

KPI enables assessment of the overall level of corporate governance, commitment to corporate culture and compliance with corporate ethics of the Partnership.

Calculation is made in accordance with the methodology for diagnosing corporate governance in legal entities in which more than fifty percent of the voting shares are directly or indirectly owned by the Fund (approved by the decision of the Fund's Board on 26 September 2016, Report No. 35/16)

Not lower than BBB/ A (To be set by the Sole Shareholder)

The target value for 2017 is not set as it is planned to apply KPI starting from 2018.

-

Attracting strategic partners

KPI allows tracking the result of the Partnership's activity in order to attract strategic partners for project implementation.

Количество стратегических партнеров, с которыми подписаны юридически обязывающие соглашения о совместной реализации проектов в отчётном году

Not less than 1 partner per year (to be determined)

1 0

Value of innovation portfolio

KPI is intended to stimulate development and evaluate the competences of the

(to be calculated based on successful outcome

The target value for 2017 is not set as

-

32

Partnership in the field of innovation.

где:m – total number of research projectsnk – total number of research project stages kpik- probabluty of success in stage i of the research project kICik – total reduced volume of investments made for the research project k up to the stage i NPVk – net present value of new production in case of successful research project kp0k = 1

of the portfolio during the first 3 years)

it is planned to apply KPI starting from 2018.

Timely implementation of the reference points in investment projects

KPI supports and evaluates the achievement of the strategic goal to ramp up competence in capital construction project management.

The final KPI value is calculated like the arithmetic mean between the figures calculated for each investment project for which target dates are set. At the same time, for each individual investment project in case of more than one reference point the indicator is calculated in a manner similar to the arithmetic mean between the reference points determined for the project.

100% 100% 40%

Share of sales via traders

KPI provides for enhancement of the marketing function and assessment of UCC’s competence in direct sales of its own products.

The amount sold via traders not belonging to UCC for all types of products in the reporting year/Total amount of sales for all product types in the reporting year

40% 0 – Sale of own products via traders will start in 2021.

0

2.3. RESULTS OF ACTIVITIES IN PRIORITIZED AREAS OF DEVELOPMENT

Presently, UCC’s main activity is implementation of investment projects.

When performing investment activities, UCC is guided by the Investment Policy of the Fund approved by the Board of Directors of the Fund; the goal of the policy is to increase the efficiency and transparency of investment activities of companies, including by means of improvement of the interaction between the Fund and subsidiaries in investment processes.

Current UCC profile includes the following:1. Started and operating production;2. Gas- and petrochemical, agrochemical and special chemistry projects being

implemented and prospective;3. Infrastructure construction projects for special economic zones including the

construction of infrastructure for petrochemical projects (gas turbine power plant, technical gas production unit, water treatment unit).

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Information about production capacity, timing for commissioning, and results of activities under UCC’s projects in 2017 is given below:

OPERATING PRODUCTION

Reconstruction of sulfuric acid plant with a capacity of 180 thousand tons per year in Akmola region:

Production capacity 180 thousand tons of sulfuric acid per year Commissioning September 2015 Good product output in 2017 133 979 tons of sulfuric acidProduct sales in 2017 177 252 tons of sulfuric acid

Polymer production in Atyrau region:

Production capacity PE-film – 4 125 tonsPP bags – up to 48 mln. pcsBOPP – up to 14 000 tons

Commissioning PE-film – 1 quarter of 2015 PP bags – 2 quarter of 2015 BOPP – 2 quarter of 2016

Good product output in 2017 PE-film – 83 tonsPP bags – 12 583 916 pcsBOPP-film – 3 043 tons

Product sales in 2017 PE-film – 101 tonsPP bags – 12 600 976 pcsBOPP-film – 2 472 tons

Kazakh-Uzbek Trade House Neftekhim Trading LLP:Production capacity Selling chemical and agrochemical products

(sales volumes depending on contracts with consumers)

Commissioning 22 February 2017

Implementation status :

256 tons of ammonium nitrate were supplied to enterprises of Corporation Kazakhmys LLP;

requests from consumers of chemical and agrochemical products manufactured in Uzbekistan are processed for supply to enterprises and agricultural producers in Kazakhstan.

RUNNING AND PROSPECTIVE PROJECTS

Construction of an Integrated Gas Chemical Complex in Atyrau region – Phase 1 (polypropylene):

Production capacity 500 thousand tons of polypropylene per year Commissioning 2 quarter 2021

Implementation status: all external infrastructure facilities (roads, overpass, access roads, railway station,

drinking water pipeline, power lines and substations) required for the project have been built; as part of the project implementation, 30% of Chinese workforce and 70% of

Kazakhstan personnel are to be attracted; in November 2017 the general contractor was given the NTP for the project. Presently

detailed engineering and preparatory work on placing orders for long-lead equipment is being performed. A number of pre-start meetings were held in order to clarify technical issues.

Construction of an Integrated Gas Chemical Complex in Atyrau region – Phase 2 (polyethylene):

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Production capacity До 1.25 million of tons of polyethyleneCommissioning 2025-2026 (estimated)

Implementation status : a memorandum on main terms of cooperation, a memorandum of understanding on

cooperation related to the project, and an agreement on joint project implementation with Borealis were signed;

the project has passed to the stage of the feasibility study development.

Caustic Soda and Chlorine Production:

Production capacity 40 000 tonsCommissioning 2020

Implementation status : ЕРС-contract was signed; construction and erection works, as well as placement of orders for equipment was

suspended until a decision is made regarding further implementation of the 4-th start-up complex of the Glyphosate project within the allowed 180-day time limit provided for by the EPC-contract;

the project is 100% financed.

Glyphosate and phosphorus trichloride (herbicide) production:

Production capacity 10 000 tonsCommissioning 2020

Implementation status : design and estimate documentation was developed; construction and erection works are carried out for the 1 and 3 start-up complexes,

construction and erection works for the 2 start-up complex have been finished, launch preparation work is being carried out;

design and estimate documentation for the 4 start-up complex is passing state expertise; the project is 100% financed.

Production of catalytic cracking catalysts (FCC):

Production capacity 20 thousand tons of catalytic cracking catalysts per year

Commissioning 2024 Stages of project implementation Stage 1 (2017-2019):

establishment of a joint venture; construction of a logistics hub.Stage 2 (2019-2020): construction of a laboratory for testing FCC catalysts and raw materials of Kazakhstan origin.Stage 3 (2020-2021): development of the project feasibility study for the construction of an FCC catalyst plant; research of mineral resources required for the production of FCC catalysts.Stage 4 (2021-2024): construction and commissioning of the FCC

35

catalyst plant; commencement of FCC catalyst component production.

Implementation status : a tender for the sale of 87.5% of KMG's share in KazOilMash LLP was held, following

which GRACE was declared the winner; a purchase and sale contract was concluded between KMG and GRACE; in January 2018 GRACE sent the second application to the Committee on Regulation

of Natural Monopolies and Protection of Competition 17; a framework agreement for the Project was concluded between KMG, UCC and

GRACE; KMG, UCC and GRACE are currently discussing the projects of the Foundation

agreement and the JV Charter.

Localization of hydrogen peroxide production:

Production capacity 14 thousand tons of hydrogen peroxide per year

Commissioning 2020

Implementation status : the minutes of the meeting with Solvay, SAP Kazatomprom JSC, Kazatomprom-Damu

LLP and UCC were signed under the chairmanship of the Minister for Investments and Development of the Republic of Kazakhstan, Zh. Kasymbek;

UCC and Solvay signed a Cooperation Agreement aimed at establishment of partnership relations and development of long-term, efficient and mutually beneficial cooperation of the parties intended for the project implementation;

the Investment Committee of Samruk-Kazyna JSC approved the Concept of the project; Solvay is developing a preliminary feasibility study of the project (hereinafter referred

to as the Pre-FS). The contractor for the architectural and construction part of the Pre-FS is R&D Design Institute Kaztekhproyekt LLP, the marketing and financial parts of the Pre-FS are prepared by Solvay. Presently, Solvay plans to finish their part of the Pre-FS, consolidate and send it to UCC for approval;

based on the results of the meeting in the Investment Committee of the Ministry of Investments and Development of the Republic of Kazakhstan, the issues of testing peroxide underground leaching process at the mines SAP Kazatomprom JSC and the possibility of signing off-take contracts with subsidiaries and associated companies of SAP Kazatomprom JSC are worked on;

currently the issues of concluding a Preliminary Agreement between UCC and Solvay including both parties’ obligations to develop a feasibility study for the project, approval of the Roadmap for the project, the main conditions for the establishment of a joint venture, as well as the possibility of signing off-take contracts and using hydrogen peroxide in natural uranium extraction during research work carried out at the expense of Solvay’s funds and resources, are currently worked on.

SPECIAL ECONOMIC ZONE INFRASTRUCTURE CONSTRUCTION PROJECTS

Construction of a gas turbine power plant (GTPP):

Production capacity 310 MWCommissioning 2020

17After obtaining a consent from the Committee on Regulation of Natural Monopolies and Protection of Competition, GRACE and KMG will execute the right-stating documents for KazOilMash LLP within 30 days (Foundation agreement, Charter). Then, within 90 days as of the date of re-registration of JV, GRACE shall sell, and UCC shall purchase 12.5% of the JV participation share.

36

Implementation status: work on the building of central control panel, condensate pumping, building of

workshops and warehouses, cable ducts, on installation and connection of the main equipment, gas turbines, steam turbines and waste heat boilers has been carried out.

the following works were performed: installation of site rail bars and gates; grouting for pipeline supporting foundation preparation; installation of lighting conduits; installation of conduits for TUPG-1 instrumentation sensors; layout of instrumentation cable between Analog terminal box and TUPG-1

instrumentation sensors; installation of cable for TUPG-2 fuel gas skid;

in order to ensure timely financing of GTPP for 2018, budget procedures were carried out to adjust the Investment Proposal, and the decision of the Republican Budget Commission was received in October 2017.

Installation of compressed air and nitrogen production unit (TG) and water treatment and water purification unit (WT):

Production capacity of technical gas unit (TG) gaseous nitrogen – 149.9 mln. cubic metersinstrumentation compressed air – 79.4 mln. cubic meterscompressed technical air – 604.0 mln. cubic meters

Production capacity of water treatment and water purification unit (WT)

service water – 14.3 mln. cubic metersprocess water – 15.7 mln. cubic metersdemineralized water – 1.4 mln. cubic meterswastewater disposal services and drainage (waste water units) – 2.2 mln. cubic meters

Commissioning 2020

Implementation status: negotiations with potential investors: Cryogenmash (Russia), Air Liquid (USA), Linde

(Germany) regarding participation in TG on the Build-Own-Operate terms (BOO) were held; indicative conditions from the inverters were obtained. An off-take contract with

investors is currently developed and agreed upon; budgetary procedures aimed at adjustment of the Investment Proposal to receive

funding from the republican budget were performed, and the decision of the Republican Budget Commission was received in October 2017 .

SEZ National Industrial Petrochemical Technopark:

Commissioning 2019

Implementation status: Memorandums of cooperation with BN Product LLP, WestGasOil LLP 18 and

BatyrServicePlus LLP were concluded; Two secondary activity participants were registered: Kazchemproduction LLP19 and

AlmexPetrochemical LLP20; Zavodskaya railway station was launched (service contracts concluded). As of 31

December 2017, 500 wagons were unloaded at Zavodskaya station.

Establishment of SEZ Chemical Park Taraz: 18 WestGasOil LLP LLP plans construction of a plant for production of methanol and olefins from methanol. 19 Kazchemproduction LLP provides for production of cyclohexane in the amount of 150 000 tons per year.20 AlmexPetrochemical LLP plans production of purified terephthalic acid and polyethylene terephthalate on the premises of SEZ NIPT.

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Commissioning 2018

Implementation status: a railway and a motor road were provided, construction of the main gas pipeline, power

transmission facilities, substations, storage ponds and evaporators, on-site railway tracks, on-site water supply and sewerage networks was completed. 75% of industrial and civil structures (administration building, checkpoint, fire station, garage, etc.) construction was completed. Total completion of work is 63% (according to job completion certificates), payment of 77% of the contract value was made;

at present, 8 participants are registered ready to implement the projects below: HIM-Plus LLP – phosphorus trichloride, caustic soda, technical glyphosate and chlorine, QADAM Industries LLP – various herbicides and pesticides, Central Asia Chemical LLP – ethylene polymers in primary forms, Nika LLP – hydrogen peroxide, RM Industry LLP – production of molybdenum trioxide, De plastic LLP – production of polyethylene film, Taraz chemical production LLP – corrosion inhibitors, technical lubricants, and Inter- marketing LLP – sodium xanthate production;

a working group for SEZ fulfillment was established; it included the representatives of the SEZ, UCC and the Fund. Several projects are in the phase of active operation: Tyres for heavy vehicles (Record Company), paint and varnish products (VMP), zirconium oxychloride and titanium dioxide (BashSoda) and household chemicals (Pars Ind);

more than 25 chemical industry projects including hydrogen peroxide joint production with Solvay, potassium sulfate, barite and other projects were studied and reviewed;

operation with an Iranian company named Pars Industrial Group on establishment of a joint venture for production of household chemicals (washing detergent, toothpaste, liquid soap) was commenced.

2.4. FINANCIAL RESULTSInvestment project financing is performed both with own funds of participants and loan-

based funding.The source for financing of UCC's own share in the projects is capitalization from the Sole

Participant represented by Samruk-Kazyna JSC as well as the funds of the Republican budget.

Main consolidated financial results for 2015-2017, mln. tenge

Item name 2015 2016 2017 2018 Rate of growth %* fact fact plan fact plan

Total income 9 803 24 250 13 849 34 598 12 611 250Total expenses 8 399 12 173 26 004 23 023 24 918 88Income /(loss) through the share participation method 8 646 - 4 277 - 21 - 309 - 21 15 times

CIT expenses 1 458 199 17 425 25 25 timesNon-controlling participation share 44 54 - 15 -23 -2 153

Profit /(loss) for the year attributable to the Sole Participant of UCC

8 548 7 547 - 12 178 10 865 -12 351 -

* 2017 plan to 2017 fact

Most of the actual income was generated from revenues from the company’s non-core activities (79% in the revenue structure) which amounted to 27 339 million tenge, which is 307 times higher than the planned value. The main part was constituted by the income from

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revaluation of the share of the Partnership (51%) in the charter capital of KPI Inc. LLP (26 449 million tenge). The final execution of the plan of income from core activities for 2017 was 44%.

The income from the core activities accounted for 6 022 million tenge, which is 7 708 million tenge less than the plan (13 730 million tenge).

The actual expenses for the reporting period amounted to 23 023 million tenge, which is 2 981 million tenge less than the plan (26 004 million).

The reasons for such deviation are as follows: reduction of production costs and transportation and sales costs (by 6 520 million tenge

and 305 million tenge, respectively) due to non-fulfillment of sales volume of Polymer Production LLP;

reduction in general and administrative expenses by 3 328 million tenge due to savings on costs, and a partial transfer of the expenses to subsequent periods under the projects of SEZ ChemPark Taraz JSC, KPI Inc. LLP. Consulting expenses were also transferred to 2018, as well as the expenses on the Partnership’s labor payment due to the shortage of foreign personnel;

an excess of 770 million tenge in financial expenses is due to the following reasons:а) non-fulfillment of financial expenses incurred for the projects of HIM-Plus LLP in the

amount of 571 million tenge due to late receipt of the Fund's guarantee and delayed conclusion from RSE Gosexpertiza for the 4th start-up complex;

b) depreciation of the discount for the onerous obligation of KUS LLP in the amount of 4 180 million tenge (with the plan being 2 925 million tenge). It should be noted that when calculating the planned amortization of the discount for 2017, the project of KUS LLP included GTPP and Techgas projects. At the end of 2016, when auditors calculated the actual amortization of the discount for 2017, Water treatment and VL-220 projects were included in the project of KUS LLP, which worsened the overall NPV of the project and, accordingly, doubled the amount of the reserve;

c) under the project of SEZ ChemPark Taraz JSC, discount amortization in the amount of 95 million tenge was charged, with the plan being 491 million tenge, and depreciation was calculated for the discount on accounts payable to contractors (5% is contractor performance guarantee) in the amount of 52 million tenge;

d) unplanned interest on the loan under the project of KPI Inc. LLP were charged in the amount of 439 million tenge due to the adjustment of expenses in previous periods;

e) UCC discount on the loan from the Fund for Polymer Production LLP (1.9 billion tenge) in the amount of 3 million tenge was accrued.

excess in the Other item resulted from impairment of assets in accordance with IFRS with regard to the following projects:

а) KUSLLP: in the amount of 3 897 million tenge due to the increase by the Fund in the internal rate of return from 8.7% to 8.97% and, subsequently, the excess of the total amount of investment in the project over its net value presented,

б) SEZ ChemPark Taraz JSC: in the amount of 285 million tenge due to an increase in the estimated cost of the project and non-disbursement of a part of the funds allocated for the construction of infrastructure facilities of the special economic zone.

Analytical indices for 2015-2017, mln. tengeItem name 2015 2016 2017 2018

Plan Fact PlanAsset value 208 233 225 895 797 288 432 497 544 067Income from non-core activities 5 615 17 840 119 28 519 174Prime cost 2 526 5 047 11 867 5 347 12 491Labour costs 1 970 2 564 4 958 3 185 5 685Payments to the State for Taxes in the Budget 456 118 1 436 1 380 961

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Payments to suppliers 3 710 6 390 7 577 6 980 10 497Charity and sponsorship - - - - -

Funds received from the state - - - - -

Total capitalization 82 170 33 675 156 855 27 178 35 078Own capital 178 291 165 454 177 120 204 998 219 550Loan capital 14 645 9 286 166 979 147 415 234 898Annual net profit 8 548 7 547 -12 177 10 865 -12 351

The growth of assets is mainly due to the following reasons: an increase in the fixed assets by 106 070 million tenge mainly due to complete

consolidation of KPI Inc. LLP and KLPE LLP as well as implementation of projects of KUS LLP and HIM Plus LLP;

a decrease in investments in jointly-controlled entities and associated companies in the amount of 32 860 million tenge is mainly related to the reclassification of investments of KPI Inc. LLP from a joint venture into a subsidiary;

an increase in the accounts receivable and other assets in the amount of 119 814 million tenge, which was mainly due to advance payments made for the outstanding works on the project implemented by KPI Inc. LLP.

Most of the actual income was generated from revenues from the company’s non-core activities in the amount of 27 339 million tenge, which is 307 times higher than the planned amount. The main part was generated by the income form revaluation of the share of the Partnership (51%) in the charter capital of KPI Inc. LLP (26 449 million tenge) and financial income in the amount of 1 179 million tenge from placement of the VCDS in the second-tier bank.

In the reporting period, the actual capitalization by the Fund was at 27 178 million tenge, which is 17% of the target value of 156 855 million tenge. The deviation resulted from:

non-fulfillment of the capitalization plan for HIM-plus LLP, which was mainly due to a delay in design and estimate documentation development for the 4 th start-up complex under the Glyphosate project; under the project Kaustik: due to cancellation of the EPC-contract with two contractors and subsequent choice of the third EPC-contractor;

deviation was caused by the process of agreeing with the state authorities of the Republic of Kazakhstan on the acquisition of a 48% share in the charter capital of KPI Inc. LLP, and updating the assessment of the share of KPI Inc. LLP in accordance with the legislation of the Republic of Kazakhstan.

The capital increased as a result of the charter capital increase of 27 188 million tenge, the accumulated loss decrease of 12 707 million tenge, and the minority interest increase of 56 336 million tenge.

An increase of 138 161 million tenge in the long-term loans was mainly due to the tranche for the loan of KPI Inc. LLP from the State China Development Bank in 2017 for the amount of 135 923 million tenge.

Labor remuneration grows proportionally to the increase in the number of personnel and the transition of projects onto the production stage.

Payments to suppliers increase as the production companies reach their full capacity.

2.5 THE MAIN PR EVENTS OF UCCOn the 4 th of September in 2017 y. within the final series of "Energy of the Future"

Forum, which took place in the International Exhibition Complex EXPO 2017 Congress Center , UCC held a session under the name of "Prospects in the Chemical Industry", at which such global issues and tasks were discussed:

energy alternative sources development prospects in the chemical industry;40

global trends in the area of petrochemical products use for the value-added products production;

exchange of experience and expansion of relations with international organizations in the field of ensuring sustainable of chemical industry development

Among the main session’s speakers the invited guests have acted, they are: Jamie Makkuilkin -the representative of Resource International company has acted on a subject of "Modern trends in the field of plastic processing" and also Mr. Kai Dzhao -the representative of Methanol Institute company has acted on a subject : " Methanol Production and its derivatives ".

Besides, during 2017 year the UCC group of companies participated in thematic forums in Kazakhstan, and in the neighboring countries as well:

Atyrau Invest – 2017; Global Oil & Gas Atyrau 2017; Astana economic forum – 2017; Tatarstan oil and gas chemical forum; Road show "The Presentation of the Special Economic Zones investment potential of the

Republic of Kazakhstan".

2.6 DEVELOPMENT PROSPECTS FOR INVESTMENT PROJECTS IN 2018:

JSC «MC SEZ «NINT»:

SEZ new participants attraction; SEZ potential participants support; SEZ active participants number increase; popularity increase among the target audience (NCB Atameken, JSC "NC"

KAZAKH INVEST "); informing the target audience about the opportunities for production facilities and

SPP projects creating on the SEZ territory; administrative barriers reduction; Segmentation of land.

JSC «MC SEZ «KhimPark Taraz»: development and adoption of at least 3 directions of the SEZ "KhimPark Taraz"

development (chemical, based on raw materials and without reference to the industry); projects preparation, based on the region's raw materials base; work out of the options for cooperation with neighboring countries chemical companies

to establish the joint venture or production relocation; communication with LLP "Kazakh-Uzbek Trade House Neftekhim Trading" for

cooperation with Uzbek companies; definition of need for the social infrastructure of the MC and SEZ participants; negotiations with the SEZ participants about the social infrastructure facilities

constructing possibility within the framework of public-private partnership; transfer of 26% of the voting shares of JSC "MC SEZ KhimPark Taraz " to Zhambyl

region Akimat and Ministries.

The Gas Turbine Power Plant Construction (GTPP):

The general construction works completion; The preparation for carrying out balancing and commissioning works; the beginning of engineering networks construction;

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the projecting of HVL-220 кV and SS, and the beginning of construction; the budgetary procedures completion for financial and economic justification

correction.

Compressed air and nitrogen production (TG): The choice of investor, partnership agreement conclusion; The conclusion of a offtake contract between the investor and LLP “KPI” (the main

consumer).

Water treatment and treatment installation (WP): completion of budgetary procedures on the financial and economic feasibility study

adjusting; General Contractor Agreement conclusion; The beginning of projecting and equipment ordering; the projecting beginning of the external water conduit.

High-voltage line 220 kV and substation (HVL-220 кV and SS) projecting completion; credit agreement conclusion with a second-tier bank; selection of the contractor for construction.

The integrated gas chemical complex Construction in Atyrau region – the First phase (polypropylene):

PMC consultant mobilization; start meeting with the EPC contractor; detailed projection of the LSTK phase; placing of orders and purchase of long-term equipment; purchase of other equipment and materials; construction and installation works (IGCHC main complex construction) on-site railways construction (including loading and unloading infrastructure); construction of asphalt concrete pavement for in-site roads; connection to energy carriers and engineering networks; commissioning and operational works and warranty testing of IGCHC.

Construction of integrated gas chemical complex in Atyrau region – the Second phase (polyethylene):

work on attracting of credit financing; development and coordination of the Intergovernmental Agreement between the Republic

of Kazakhstan and the United Arab Emirates; development of TEJ project.

Production of phosphorus trichloride and glyphosate (herbicide): equipment ordering; start of the 2 launch complex and the start of formulating glyphosate production.

LLP "Kazakh-Uzbek Trade House" Neftekhim Trading ": organization of representative office in Tashkent (Uzbekistan); sign the contracts for special chemicals supplying of the mining and metallurgical

complex of Kazakhstan; agrochemistry supplying of APP during the spring-summer season 2018.

Production of Fluidic Cracking Catalysts(FCC): Within the Project first stage, it is planned to:

create the joint venture (JV) by sale of 87,5% of “KazOilMash” LLP part of KMG to GRACE company (USA)

re-registrate of the JVC;

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sale by the GRACE company to UCC of 12,5% of JV part; sign long-term contract of catalysts delivery between ORF and JV; provide financing of JV by the GRACE "carry" company; Construct thelogistic hub

Hydrogen peroxide production Localization (together with Solvay): sign the Preliminary agreement between UCC and Solvay; completion and approval of the TEJ project; on condition of positive results of TEJ project of hydrogen peroxide installation

production capacity 14 000 tons/year:

Confirmation of possibilities to sign long-term contracts (for the term of not less than 5 years) of hydrogen peroxide on supplying by joint venture company to JSC NAC Kazatomprom group of companies (or to other legal organization, appointed by JSC NAC Kazatomprom) in reasonable time

the sign of memorandum between UCC, Solvay and JSC NAC Kazatomprom understanding, which provides intentions of the parties to sign the long-term contracts for hydrogen peroxide supply on market conditions with production quality correspondence to the consumer requirements;

rendering full assistance and necessary coordination in tests conducting on use of peroxide connections (hydrogen peroxide, Caro's acid) for underground uranium leaching. development of the TEJ project; after a statement and state examination of TEJ project, on condition of economic

feasibility of the project implementation, the parties will start discussion: creations of joint venture for project implementation ; conclusions of long-term contracts for hydrogen peroxide supply; other decision on further implementation of the project.

IN THE FIELD OF HUMAN RESOURCE MANAGEMENT:By the principle 70/20/10 for training and development of Association employees the introduction of electronic distance learning (E-learning) – training with help of information and electronic technologies is planned;

to finish transition to new organizational structure of UCC: to carry out assessment of positions (gradering) of the CEO-2,3,4

level; to staticize workers provisions and duty regulations; to develop and put into operation the new system of compensation

and remunerations for the leading, administrative and administrative personnel;

to carry out assessment of compliance according to the new requirements of positions (Job Matching);

to appoint UCC employees to positions according to the new organizational structure;

to staticize the map of business processes. within implementation of training "Zhas Өркен" program is

planned to finish rotation – 1 and to sum up the training results. Since March of 2018 it is planned to start realization of actions for rotation – 2, provided by the approved Road map on implementation of the Zhas Orken program.

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THE CALENDAR OF CORPORATE EVENTS FOR 2018 YEAR: participation at large petrochemical forums in Moscow and Kazan; participation at numerous forums, business meetings, which are

organized by JSC NC KAZAKH INVEST, and others. organizations;

participation in the forum " Russia and CIS Oil chemistry and Gas Monetization ";

participation in the forum " Caspian Sea and Central Asia Oil Processing and oil chemistry ";

conduction of information and image actions (participation in investment forums, exhibitions, conferences, road show, etc.).

3. CORPORATE MANAGEMENT3.1. PRINCIPLES OF CORPORATE MANAGEMENTFor the purpose of maximizing profit and cost of the Company, UCC applies the best advanced practices of corporate managementThe main focus of corporate management is:

strategic objectives, including sustainable development goals; accurate vertical of corporate management: The only participant –

the Supervisory board – Directory; the Supervisory board and Directory activity efficiency ; assessment for efficiency achievement; risk management systematic control; politicians in group; transparency and system of internal control.

UCC Corporate management is based on 6 fundamental principles, which bare noted in the Code of corporate management:

corporate management system; sustainable development (economy, ecology, society); rights of the Only participant and fair attitude towards him; efficiency of the Supervisory board and Executive body; risk management, internal control and audit; transparency.

1. Corporate management system:The corporate management system represents by the set of the processes, which provide

the management and control of UCC and SDO activity, also the system of relationship between Board, the Supervisory board, the Only participant and interested parties. Competences of bodies and an order of taking the decisions are accurately defined and described in the Charter of UCC.

The corporate management system provides: the order of questions consideration and decision-making; accurate differentiation of powers and responsibility between

bodies, officials and workers; timely and high-quality decision-making by UCC bodies; processes efficiency of UCC activity; compliance to the legislation, Code of corporate management and

to internal documents of UCC. In UCC and SDO the bodies and structural divisions regulations, instructions for the

corresponding positions are approved. Observance of provisions of these documents provides system and the sequence of processes of corporate management.

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2. Sustainable development:In UCC the control system is built in the field of sustainable development, which includes

but it is not limited by the following elements: commitment to the principles of sustainable development at the level of the Supervisory

board, Board and employees of UCC; map development of interested parties; definition of the purposes and efficiency in the field of sustainable development,

development of the plan of measures and definition of responsible persons; integration of sustainable development into key processes, including risk management,

management of human resources, the reporting and others and also in the Development strategy of UCC and decision-making processes;

professional development of officials and workers in the field of sustainable development;

assessment of goals and KPI, acceptance of the correcting measures, introduction of culture of continuous improvements.

The supervisory board and UCC Board provide the formation of appropriate system in the field of sustainable development and her introduction.

All workers and officials at all levels contribute to sustainable development.For appropriate and high-quality introduction of sustainable development in the long-term

period we have developed the Plan of measures in the field of sustainable development of UCC for 2017-2019 (further – the Plan). This Plan has been developed according to the Code of corporate management. Besides, while its development we considered the international declarations and standards (Guidelines of Organization of Economic Cooperation and Development for the multinational enterprises (OECD Guidelines for Multinational Enterprises), the Declaration of the environment and development, accepted by the Conference of the United Nations in Rio de Janeiro on the 3-14th of June in 1992, the Global contract of the UN Global Compact Priciples. Three categories of sustainable development are reflected in the Plan: economic, ecological and social, where on each of them aspects and the list of actions are provided. According to the Code of corporate management and the annual letter of Expectations from the Only participant of UCC, since 2017 we prepare the consolidated annual report where there is the report in the field of sustainable development, according to the Management of GRI G4. In 2017 the Expert RA Kazakhstan rating agency has carried out independent assessment of quality of the annual reporting of the Kazakhstan companies, according to which in the rating of 100 best annual reports for 2016 (by the content) the Annual report of UCC has taken the 2nd place, having rushed into the list of leaders. Rating Originators have noted the high level of training and good informational content of the UCC Annual report in 2016.

3. Rights of the Only participant and fair attitude towards him:According to UCC internal documents and established practices, the Only participant has

an opportunity to obtain information about UCC and his DZO, which is necessary to adopt the relevant decision, taking into account requirements of confidentiality and disclosure of information.

Providing information to the Only participant is carried out in the necessary volume to adopt the relevant decision, including the Only participant questions, on which timely answers are provided.

According to the UCC Charter, the Only participant has the right to obtain information about UCC activity and to get acquainted with his accounting and other documentation.

The basic principles of information delivery about UCC activity to the Only participant are regulated by the UCC information policy Provision, according to which the Only participant, personnel, business partners, the public, public authorities – are the UCC information receiver.

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The structure of UCC corporate management fully provides timely and exact granting of information to the Only participant and the Supervisory board about all essential aspects of activity of UCC, including financial position, execution of the development plan, results of investment activities, structure of assets and a control system, purchases and risks reporting.

According to the legislation of RK the information about questions of the taxation, the state statistics is provided to authorized public authorities; on a quarterly basis, the reporting to National Bank of Kazakhstan is provided.

4. Efficiency of the Supervisory board and Executive body:The supervisory board has enough rights for organization management and control of UCC

activity. The supervisory board performs the functions according to UCC Charter and pays special attention to

definition of the UCC Development strategy (directions and results);

statement and monitoring of key activity indicators of the development plan;

the organization and supervision of effective functioning of a risk management system and internal control;

statement and monitoring of effective implementation of large investment projects and other key strategic projects within Supervisory board competence ;

election, remuneration, planning of continuity and supervision of activity of the head and board members of UCC;

corporate management and ethics; observance of corporate management and corporate ethics Code

on UCC.In practice, the persons, who have an experience in the companies of chemical branch on

the first positions, the persons who have an extensive experience of the management of the technical direction in oil and gas companies; persons, having experience of the leading work in audit divisions -are a part of UCC Supervisory board;.

G4-40 Age of Supervisory board members varies from 37 to 48 years, length of service – from 11 to 20 years, including on the leading positions – from 5 to 12 years. UCC Supervisory board consists of 3 men.

The UCC Annual reports have detailed description of UCC Supervisory board members biography and reveals (date of the first and date of the current election to the UCC Supervisory board; nationality; date of birth; education; experience for the last five years; work and membership in directors Board / Supervisory boards of other organizations; holding of UCC suppliers and competitors parts).

5. Risk management, internal control and audit: On the basis of UCC risk management Policy, approved by UCC Supervisory board by the decision the Corporate risk management system is created (further – CRMS) at all levels of UCC. Also the Provision on the UCC internal control system (further – ICS) has been accepted Introduction and improvement of CRMS and ICS is a necessary condition of UCC strategic and operational objectives achievement. The risk management system and internal control – are the set of politician, the processes and procedures, standards of behavior and actions, promoting the effective and rational UCC activity, which help to react to essential risks for providing a reasonable guarantee performance of UCC purposes, including such achievements:

efficiency of UCC activity; safety of assets, information and effective use of UCC resources; completeness, reliability and reliability of financial and

administrative UCC statements;46

observance of legislation of RK requirements and UCC internal documents;

Minimization of risks due to introduction and maintenance of optimum system of risk management.

ensuring efficiency of business processes, identification and commission of non-standard operations,

preventions, restriction and prevention of possible illegal actions from officials and employees of UCC.

Introduction and functioning of a risk management system and internal control in UCC has the COSO standards. The seminars for heads of structural divisions, UCC and SDO employees are held annually for introduction of appropriate risk management culture. The questions, the main components of a corporate risk management system are discussed on the seminars : methods of identification, assessment and risk management. The UCC new employee has acquaintance with documents on UCC risks Besides, in 2017 the UCC Audit commission carried out ICS assessment. The diagnostics general result of the system of internal control was 83,4%:

the control environment" - 85,3%; assessment of risks - 76,4%; control procedures - 85,3%; information and communication channels - 87,5%; monitoring - 100%.

6. Transparency: UCC and his SDO open the information of their activity for interested parties, according to

the legislation of RK, the Code of corporate management and internal documents.For ensuring way of spread out the information in UCC and its SDO, the internal

documents have been approved, which define the list of information for interested persons, terms, order, a way, a form of information, responsible officials and workers with the indication of their functions, and duties, and also other provisions regulating processes.

The basic principles of disclosure of information about UCC activity are regulated by the Provision of UCC information policy and by the Instruction of ensuring safety UCC office and trade secret.

According to the Instruction of ensuring safety of UCC office and trade secret, the about activity of UCC, information, that is distributed, is subdivided into three groups:

the data, which is the subject to disclosure to the Only participant; the data, which is the subject to obligatory and strictly established

order representation to authorized public authorities; the data, that is opened to the interested and other persons.

Monthly the UCC sends the results of financial - economic activity to Fund, quarterly – the reports of investment UCC activities. According to the results of the year UCC forms the Annual report which contains detailed information on the main aspects of activity of UCC, including information of the main events of a year, financial results, the realized investment projects and the available assets, corporate management, affiliated and dependent organizations activity, including tasks and plans for q new coming year, the information about structure and work of the UCC Supervisory board, etc. The annual report of UCC publicly extends, by placement on the corporate UCC website, which promotes to increase the business reputation and investment attractiveness of UCC group of companies.

To improve UCC corporate management in reporting year the number of actions is held: seminars and training of safety measures and the environment,

politicians and methods of anti-corruption, sustainable development, use of norms and principles of corporate ethics and business behavior for the UCC staff;

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by results of the analysis of the current practice compliance to Code provisions of corporate management, the UCC internal normative documents are actualized; plans, provisions and politicians are developed;

actions execution monitoring to achievement the UCC Only participant expectations.

Within transformation of JSC Samruk-Kazyna, on the basis of the Corporate university, "Samruk-Kazyna" "The general center of service HR QYZMET" has been created in 2017.

The transferred processes in GCS:

staff office-work: personnel administration, accounting of working hours;

management of remuneration: calculation and charge of the salary, awards and bonuses;

training administration: work with providers of training, precontractual and contractual work, calculations, attendance control, training budget development monitoring;

recruiting: services in carrying out selection of potential candidates for vacancies;

assessment: administration of carrying out annual assessment of staff activity.

During 2017 year, plans, politicians, rules and provisions for ensuring efficiency of UCC organizations bodies activity have been developed and approved within corporate management Code introduction (Gap-analysis)by the affiliated UCC organizations, while taking out corporate decisions, to improvement of risk management and internal control practice.

3.2. UCC CORPORATE ETHICS The UCC group adheres the high ethical standards and introduces necessary procedures for

ensuring constant application of these standards by all workers and partners of UCC group. The relations inside UCC group based on a fair and transparent basis, with application of

the highest standards of professionalism and ethics, according to such values as honesty, conscientiousness, mutual respect and a presumption of innocence and also fundamental corporate values, which are noted in the UCC Code of corporate ethics. G4-56

Table. Corporate values of UCC group

The pursuit to excellence Creating unrivaled working conditions for staff Creating Value

each of us assumes responsibility for achieving outstanding results;

each of us is open for feedback, education and development;

each of us has the right to vote, if he does not agree with the opinions or actions of others;

each of us acts in accordance with the highest professional and ethical standards

each of us is a leader and takes part in creation of unsurpassed conditions for work and development of colleagues;

each of us is responsible for formation of not hierarchical and meritocratic collective

each of us is concentrated on value creation in the activity and cooperates with internal and external partners to achieve the result;

each of us entirely accepts and realizes changes to achieve the simplicity, clearness, efficiency, speed of the tasks solution and decision-making, and decrease of bureaucracy

Workers of UCC group follow corporate ethics Code provisions in relationship with officials, for adoption of strategic important corporate decisions as well as daily situations.

For effective Policy realization of the corporate conflicts and the conflict of UCC interests settlement, by the order of the UCC Board Chairman, The Ombudsman has appointed since 2011. His duties are the explanation of provisions of the UCC corporate management and

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corporate ethics Codes, compliance of corporate ethics Code by workers and officials. In case of need, explanation of Code provisions. G4-57 UCC staff complaints on violation did not arrive until present day.

Within corporate management system improvement measures in UCC group of companies, the Policy of the notice of alleged violations acts for creation of bases to transparency increase and accountability in UCC activity, by giving an opportunity to UCC employees and UCC group of companies to declare their fears, connected with the practice, breaking standards of the legislation or UCC internal documents. The real Policy defines the basic provisions, which are directed to regulation of the order of filing the violations applications, their consideration, taking measures according to the results of their consideration and also establishes bases for support of UCC employees and UCC group of companies. Notices of alleged violations according to the real Policy in UCC and its affiliated organizations go directly to Authorized officers – Audit commission and the Ombudsman, by mail and also by UCC hot phone line (+7 (7172) 73-71-58), or by e-mail (hotline@ucc.com.kz). In practice the UCC Directory and all its structural divisions don't interfere to the transfer of the information of alleged violations to authorized officers. G4-58

Besides, in December of 2017 the Information session about politicians and procedures, which is connected with aspects of human rights, significant for UCC activity, has taken place in UCC.

The questions of UCC corporate culture and also the main functions, the rights and duties of the UCC Ombudsman have been discussed on the Information session.

3.3. ANTI-CORRUPTION AND ANTI-BRIBERY MEASURESBy the aim to introduce the corporate management Code and sustainable development, the

anti-corruption Policy has been developed and approved in UCC. It establishes the basic principles of anti-corruption and administrative and organizational bases of prevention of corruption and fraud, fight against them, minimization and (or) mitigations of consequences of corruption and roguish actions in UCC and its affiliated organizations. The Policy are directed to prevent the possible facts of corruption and fraud, formation the atmosphere of tough rejection of corruption and fraud in UCC.

The anti-corruption and fraud Policy in UCC is developed to form the legal culture, which rejects corruption and fraud and also ensures the principles of honesty and integrity while the activity on the working position by UCC workers and its affiliated organizations. The tasks of the Policy are:

Anti-corruption in UCC is based on the following basic principles: legality; publicity and openness of activity; conducting anti-corruption examination of normative UCC legal

documents and their projects; complex use of administrative, organizational, information, social

economic, legal, special and other measures; implementation of anti-corruption promotion; cooperation in anti-corruption activity with public authorities and

also UCC partners and clients. elimination of the reasons and conditions, which form corruption and fraud; prevention of corruption and roguish actions; Association employees education of strict RK acts observance and also the internal

normative documents, which regulate the activity of Association; prevention of existence of corruptogenic factors in internal normative documents of

Association.

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The training action for the subject "Application of the Anti-corruption Legislation of the Republic of Kazakhstan" has been organized for UCC board members in 2017, within sustainable development. The following subjects have been discussed:

operation of the Law of RK "About Anti-corruption": the persons which are carrying out administrative functions in the public sector. In relation to legal persons: to joint-stock companies and limited liability companies, explanation of a conceptual framework: who is understood as the persons which are carrying out administrative functions (for example, board members, individual executive body (director), persons, the persons having the right to dispose of property of the legal entity);

what kind of restrictions are provided by the above-stated Law for the persons which are carrying out administrative functions: anti-corruption restrictions. To explain each restriction, with reduction of examples, responsibility for their violation (with references to articles of CC, CC, ACC, EC, the Code of RK about marriage and family (matrimony), the Enterprise code) and other acts in this sphere);

what kind of declarations needed to be handed to candidates, which are carrying out administrative functions according to the tax law of RK. What terms, a form of handing over, responsibility for non-presentation of the declaration (with references to articles the CC, CC, ACC, EC and other LRA);

receiving and donation of gifts, according to RK CC. What do to do if you have presented a gift? Responsibility for receiving and donation of a gift. How to buy and keep account of gifts;

the activity, which is not compatible to performance of the state functions (explanation of a basic provision of the Law RK "About public service). Trust management of property and actions;

inadmissibility of close relatives work; situations of the conflict of interests according to the corporate

legislation (About the JSC and LLP); structures of corruption offenses: CC of RK and ACC of RK

Sanctions; anti-corruption monitoring, internal assessment of corruption risks

3.4. UCC STRUCTURE AND ADMINISTRATIONThe corporate management system of UCC represents the set of processes and relationship

of the bodies, which provide management and control of UCC activity. The corporate management system of UCC is directed to decrease the investment risks, growth of investment attractiveness, and increase in cost of UCC.

The UCC follows the highest standards of corporate management, taking into account achievements of Kazakhstan and international practice of corporate management, constantly improves mechanisms and procedures of corporate management and aspires to the level of corporate management established for JSC Samruk-Kazyna group of companies.

Appointment of UCC collegial bodies members Appointment of NC members is within the competence of the Only participant and is

carried out according to his internal procedures.Appointment of board members is within the competence of the Only participant and is

carried out according to his internal procedures.Election of Audit commission is within the competence of the Only participant and is

carried out according to his internal procedures.G4-38 According to the UCC Charter, the UCC corporate management bodies are:

Picture. Management structure UCC

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The Only participant- the highest bodyAdit Committee- control body Supervisory board- supervisory body

Directory- management body SDOBudget Committee Credit Committee Investment CommitteeRisk Committee scientific and technological Committee Technical Committee

The list of corporate management documents, existing in UCC Charter Code of corporate management Code of corporate ethics Guide to corporate management of SDO Supervisory board Provision Board Provision on the Audit commission Provision NC Secretary Provision Budgetary committee Provision Credit committee Provision Investment committee Provision Risks Committee Provision Technical council Provision Scientific and technical council Provision

UCC target organizational structure has been developed on the 30 th May in 2017 year by the Supervisory board decision according to the new Development strategy of Association for 2017-2026.

Within phased transition to a new organizational structure, the Association has held the following events:

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interviews on competences with workers of the СЕО -1, 2, 3, 4 level have been conducted; positions descriptions of СЕО -1 level (by the solution of NC on the 14 th of December,

2017) have been approved; positions assessment of СЕО -1 level has been carried out (gradering); descriptions of key positions of Association and positions of the СЕО -2, 3, 4 level have

been developed; workers profiles have been prepared

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53

Fig. Organizational structure of UCC (December 31, 2017)

The Only Participant

Audit Committee

Supervisory board

Complain service

Risk management service

Chairman

Supervisory board secretary

Consultant

Assistant

Managing Director for business development

Managing Director of capital projects management center

Legal support Director

Managing Financial Director

Corporate management Director

The Co - Director

The Co - Director

Marketing and logistics service Capital project management department Department of technical and technological support of capital projects. engineering service. construction service commissioning and operation start-up service

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Legal departmentPlan and economical departmentDepartment of personnel management and administrative and economic activitiesStrategic planning serviceDepartment of planning, monitoring and technical documentationCorporate management departmentCorporate Finance and Treasury DepartmentGR and PR serviceAsset management DepartmentAccounting and reporting DepartmentProcurement Department

The Only participantThe only participant of UCC is the Joint-stock company "National welfare fund "Samruk-Kazyna". JSC Samruk-Kazyna is created according to

the President of the Republic of Kazakhstan Decree on the 1th of October in 2008. No. 669 "About some measures for competitiveness and stability of national economy" and by the resolution of the government of the Republic of Kazakhstan on the 17 th of October in 2008 No. 962"About measures for implementation of the Decree of the President of the Republic of Kazakhstan on the 13 th on October in 2008 No. 669". by merge of joint-stock companies: "Fund of sustainable development "Kazyna" and. "The Kazakhstan holding of the state assets management “Samruk”. JSC Samruk-Kazyna is created to increase the competitiveness and stability of national economy. And also, for factors of influence on economic growth in the country of possible negative changes in the world markets. The main objective Fund activity is management of belonging to him, the equity stakes (shares) of National Institutes of development, the national companies and other legal entities, for maximizing their long-term value and increase their competitiveness in the world markets.

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The decisions of the Only participant, which are made within his competence, are obligatory for NC and UCC Directory.The only participant makes key decisions about UCC activity, by means of decisions of the Only participant and representation of his officials as

a part NC UCC. Appointment of NC UCC members, board members, election of Audit commission- is within the competence of the Only participant and is carried out according to his internal procedures.

The only participant plays an active role in formation of corporate management in UCC by the way: introductions of the new corporate management Code, which has been approved by the Only participant of UCC on the 27th of May in 2015 No.

22/15; rendering methodological support while the introduction of corporate management standards , including performance of corporate management

level diagnostics.Within the introduction of the new corporate management Code, which has been approved by the Only participant of UCC on the 27the of May in 2015 No. 22/15, some changes and additions were made in internal documents of UCC.

Supervisory board of UCCAccording to the UCC Charter, the Supervisory Board (SB) is created for of Board activity control. Besides, SB is responsible to the Only

participant for formation of the development strategy and achievement of long-term stable results. NC UCC defines and approves the long-term development strategy of UCC, approves medium-term development plans, plans in the field of

sustainable development, motivational key activity indicators of executives are controlled by Board activity G4-42The SB UCC decisions, which have been made within its competence, are obligatory for UCC Directory. SB UCC carries out the functions,

according to the Supervisory board Provision, which has been approved by the Order of Fund on the 28th of April in 2011 No. 28-p.

Tab. Structure of NC of UCC (status on the 31 st of December 2017y.) G4-38Name Date of birth Position Term of actionBektemirov Кuanysh Аbdugaliyevich

The 24 th of May 1970 y. NewProjects Development Managing Director for of JSC “Samruk-Kazyna” Chairman of SB

The 17 th of March of 2017 year –The 4 th of March of 2019 year

Tutkushev Yerzhan Beksultanovich The 10 th of December of 1981 y JSC “Samruk Kazyna” new branches development Managing director, member of SB

The 18 th of April of 2016 year –The 4 th of March of 2019 year

Ryskulov Aydar Kayratovich The 20 th of August of 1981 y JSC “Samruk Kazyna” corporate finance department Director , member of SB

The 6 th of June of 2016 year –The 4 th of March of 2019 year

Have left from the staff SB UCCName Date of leavingOmarovА.А. The 17 th of March of 2017 year

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Bektimirov К.А. the 9 th of February 2018 yearRyskulov А.К. The 23rd of April 2018 year

In the part of the UCC Supervisory board in 2017, the protocol No. 09/17, the following changes have happened, by the decision of Fund Board on the 17th of March in 2017: The powers of UCC Supervisory board member– Omarov Askhat Asanovich have been stopped ahead of schedule; Bektemirov Kuanysh Abdugaliyevich- has been elected to the UCC Supervisory board, by the decision of Fund Directory on the 5 th of March in

2014 (protocol No. 17/14), Bektemirov Kuanysh Abdugaliyevich has been recommended as a UCC Supervisory board member.

In the part of the UCC Supervisory board in 2018, the protocol No. 13/18, the following changes have happened, by the decision of Fund Board on the 23th of April in 2018:

-The powers of UCC Supervisory board member– Bektemirov Kuanysh Abdugaliyevich have been stopped ahead of schedule;-The powers of UCC Supervisory board member– Ryskulov Aydar Kayratovich's have been stopped ahead of schedule;

- Aydarbayev Alik Serikovich and Zhanadil Ernar Beysenuly - have been elected to the UCC Supervisory board, by the decision of Fund Directory on the 5th of March in 2014 (protocol No. 17/14), - Aydarbayev Alik Serikovich has been recommended as a UCC Supervisory board member.UCC Supervisory board Activity is carried out according to the annual plan of work. Information on execution of the annual plan of SB UCC work is considered at an NC internal meetings in the first quarter of the year.

In 2017 9 meetings of the UCC Supervisory board, 7 full time and 2 part time have been organized and held.

The number of SB meetings held in 2015-2017 yy.

Year Full time Part ttime2015 14 142016 8 22017 7 2

The questions of investment projects preparation and implementation, review of the development plan and reports on its implementation, the UCC internal regulations have been discussed at the SB meetings on a regular basis. The reports about the risks of UCC investment projects have been considered on a quarterly basis, which included consideration and discussion of the risk register, risk maps and UCC risk management Plan of action.

Totaly, 52 issues have been discussed at the meetings, on which relevant decisions were made within the SB competence, including: on investment activities and UCC projects implementation of the JCC - 6 issues have been discussed;

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for the examination of reports and UCC activities information and SDO (the expectations of the only participant, the development plan implementation, monitoring of projects, assignments, risk management, the auditing Commission) – 28 questions have been discussed;

according to the internal documents of UCC ( rules, policies, regulations, norms) - 5 questions have been discussed; on the other aspects of activity (staff, FWF, KPI etc.) – 13 questions have been discussed.

The quality and timeliness of tasks execution delivered by the Only participant to UCC fully depended of the decisions of NC made in 2017 year. The SB decisions concerned the questions of a strategic importance for UCC, such as the implementation of the development Plan, investment activities, and etc.

Table. NC UCC membership on the meetings of 2017 y.

SNPNumber of meetings which have been held during the stay in SB

Number of meetings which have been attended Meeting

paticapation, %Bektimirov Kuanysh Abdugaliyevich 7 7 100

Tutkushev Yerzhan Beksultanovich 9 9 100

Rysskulov Aydar Kaayratovich 9 9 100

Omarov Askhat Assanovich 2 2 100

Under the UCC Supervisory Board the committees are not provided.The measures taken by the SB, taking in account the Only Participant opinions about UCC were the following: On a quarterly basis, monitoring of investment projects implementation, development plans execution reports, risk management and UCC audit

reports were carried out.

Strategic questions, financial and economic and investment activities: the long-term UCC development strategy for 2017-2026 years has been approved" the Plan of activities for UCC Sustainable Development for 2017-2019 years has been approved and the reports on their

implementation have been discussed; UCC investment projects portfolio implementation schedules have been approved the expectations letters of JSC “Samruk-Kazyna” shareholder have been considered and a plan of activities

implementation by expectations for 2018-2022 years of JSC “Samruk-Kazyna” has been approved;58

the list and methods of strategic and analytical KPI 1 calculating of the UCC level for 2018-2022 years;

.The questions of corporate management, risk:

the Annual report for 2016 year, which includes sustainable development report has been approved; the principles and provisions of UCC corporate management Code for 2016 year compliance report has been approved; the regulation document about UCC Supervisory Board secretary has been approved; the regulation document about UCC Compliance Service has been approved; the Policy on corruption and fraud preventing in UCC has been approved; the guarantee Program and UCC audit Commission quality improvement have been discussed

Staff policy questions : The new UCC organizational structure has been approved; The staff of committee for coordination of CEO-1 level job position descriptions and UCC CEO-1 level the main positions list have been

formed; UCC CEO-1 level position descriptions have been approved

SDO Investment activities questions: the UCC participation in the creation of a joint venture with NHC JSC "Uzbekneftegaz", JSC "Uzkimyosanoat", JSC "O

ZSANOATEKSPORT»; previously has been discussed and approved the Business plan development of project "Organization of laboratory and analytical complex" has been approved, attracting PI "Nazarbayev

University Research and Innovation System" as a partner the acquisition of UCC ordinary parts of JSC "MC SEZ "NINT" in the amount of 211 925 pieces has been previously reviewed and approved.

UCC G4-38 Supervisory Board members Biographies

Bektemirov Kuanysh AbdugalievichChairman of the SB UCC , representative of JSC " Samruk-Kazyna»Date of election to SB UCC: the 17th of March in 2017 year, by the Decision of JSC " Samruk-Kazyna» direction (report No. 09/17). By decision

of NC UCC on the 3rd of April in 2017, (Protocol No. 03/17) he was elected as a Chairman of SB UCCCitizenship: Republic of KazakhstanDate of birth: the 24th of May in 1970Education:

Kazakh State University under the name of al-Farabi: 1993, Physicist

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Kazakh national agrarian University: 2004 electrical Engineer Work experience (last 5 years):

2012-2014 - JSC "Samruk-Kazyna", Managing Director 2014-2017 - JSC "Samruk-Kazyna", Asset management Chief Director; From 2017-2018-JSC "Samruk-Kazyna", New projects development managing Director

Work and membership in DB/SB of other organizations at the end of the reporting period: JSC "Tauken-Samruk» Directors Board Chairman JSC "KEGOC» Directors Board Chairman JSC ‘Samruk-Energy» Directors Board Chairman JSC "NC "Kazatomprom» Directors Board Chairman

Ownership of parts of UCC suppliers and competitors: no

Tutkushev Yerzhan BeksultanovichMember of UCC SB, representative of Samruk-Kazyna»Date of election to SB UCC: the 18th of April of 2016 by the Decision of JSC " Samruk-Kazyna» direction (Protocol No. 12/16). ). By decision

of SB UCC on the 22nd of June in 2016, (Protocol No. 03/16) he was elected as a Chairman of SB UCC .On the 3rd of April in 2017, he was re-elected as a member of SB UCC by protocol № 03/17.

Citizenship: Republic Of KazakhstanDate of birth: the 10th of December of 1981Education:

St. Petersburg state University of Economics and Finance 1999-2004. Economist University of Illinois, Urbana-Champaign: 2006-2007 Master of Finance

Work experience (last 5 years): 2012-2014 - JSC "Samruk-Kazyna", Director of investment projects Department 2014 - PricewaterhouseCoopers Tax and Advisory LLP, Manager 2014-2017 - JSC "Samruk-Kazyna", new industries development managing Director ; since 2018-Director of the Department of new projects development, Member of of JSC "Samruk-Kazyna»

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Work and membership in DB/SB of other organizations at the end of the reporting period: NS JSC Samruk-Kazyna invest member JSC "Tauken-Samruk» member JSC "NC Kazakhstan Engineering» member JSC "real estate Fund "Samruk-Kazyna» member

Ownership of parts of UCC suppliers and competitors: no

Ryskulov Aydar KayratovichMember of UCC SB, representative of Samruk-Kazyna»Date of election to SB UCC: on the 6th of June of 2016, by the Decision of JSC " Samruk-Kazyna» direction (protocol No. 21/16).Citizenship: Republic of KazakhstanDate of birth: the 20th of August of 1981Education:

Karaganda State University under the name of E. A. Buketova, 1998-2002 Finance and Credit Karaganda Economic University "Kazpotrebsoyuz", 2003-2006. Legal regulation in the economy Nazarbayev University, 2014-2015 master of business administration (Executive MBA)

Work experience (last 5 years): 2012-2014 - JSC "Samruk-Kazyna", Director of financial assets management 2014-till now JSC "Samruk-Kazyna", Director of corporate Finance Department

Work and membership in DB/SB of other organizations at the end of the reporting period: no

Ownership of parts of UCC suppliers and competitors: no

UCC managementIn accordance with the UCC Charter, the management of the current UCC activities and its Affairs is carried out by the collegial Executive

organization –UCC management.The management Board has the right to make decisions on any questions of UCC activities, which is not referred to the law or the Charter to the

competence of the NC UCC Only participant, and is responsible to the SB UCC Only participant, performances all its tasks. The management implements the strategy of UCC sustainable development and development plans, the execution of decisions and instructions of UCC SB the only participant, provides regular reporting about UCC activities to the UCC SB Only participant

The management operates in accordance with the Regulations of UCC management Board, which has been approved by the order of the Fund on the 5th of April in 2010, by protocol №24-p.

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Tab. Management Structure of SB of UCC (status on the 31 st of December 2017yName Date of birth Position Term of actionOserbay Zhenis Alibekuly The 9th of May 1981 Preident The 7th of March 2017-the 7th of March

2018Taygen Ruslana Aytzhankyzy The 11th of September 1981 Managing Director, Board Member The 7th of March 2017-the 7th of March

2018Almuratov Yerbulat Nurmukhambetovich The 24th of December 1978 Managing Director, Board Member The 7th of March 2017-the 7th of March

2018Mami Yerlan Yerkeshuly The 20th of January 1957 Managing Director, Board Member The 4th of May 2017-the 7th of March

2018Have left from the staff NC UCCName Date of leavingKarbuzov Kuat Kozy-Korpeshovich The 7 th of March of 2017 yearTrevor Khoppkins Sparks The 7 th of March of 2017 yearKrylova Tatyana Nikolayevna The 24th of July 2017 Almuratov Yerbulat Nurmukhambetovich The 6 th of March of 2018 yearMami Yerlan Yerkeshuly The 6 th of March of 2018 year

.In the staff of UCC Management the following changes took place by the decision of Fund direction on the 30 th of March in 2018,by Protocol

No. 11/18: Atabayev asset Assanbayuly and Ismagulov Chingis Dzhalidenovich have been elected to the staff of UCC Management

During 2017 year, UCC Management held 45 face-to-face meetings, where 244 questions have been considered, 18 of them were submitted for UCC Sole participant consideration and 55 questions have been submitted to the UCC Supervisory Board

The number meetings

Year Full time Part time2015 53 02016 60 02017 45 0

All questions, which have been submitted for the Sole participant and the Supervisory Board consideration, within their competence, were previously discussed and approved by the Board. Among them, the main block of questions- is the investment projects questions, which UCC is engaged in

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Among the main questions on which management decisions have been made, within the competence of the Board, were the questions of the subsidiaries and dependent organizations activities (LLP "JV SKZ-Kazatomprom", LLP "KPI Inc.", LLP "KLPE", LLP "Polymer Production", LLP "KHIM-plus" JSC "MC SEZ "Taraz chemical Park", LLP "Karabatan Utility Solutions", JSC "MC SEZ NINT", LLP "Kazakh-Uzbek Trading house "Neftehim trading"), including the questions of plans of development and the results of subsidiaries and affiliates activities.

Some of the important decisions, which have been reviewed and adopted by the Board in 2017: The organizational structure of UCC; Plan for a phased transition to UCC new organizational structure The regulation of UCC realized risks accounting and analysis Regulation of UCC Complaints Service; Annual procurement plan of the UCC for 2018; Report of the action Plan implementation for UCC sustainable development in 2017-2019 y,y, by the results of the 1st

half of 2017; Report of the action Plan implementation about the improvement corporate governance improvement and

implementation of the UCC corporate governance Code for 2016-2017y.y, by the results of the 1st half of 2017;The questions of UCC SDO activities have been disused at UCC management meetings during the year on a regular basis within the framework of its powers

Table. UCC membership on the meetings of 2017 y.

SNPNumber of meetings which have been

held during the stay in SBNumber of meetings

which have been attended

Meeting paticapation, %

Oserbay Zhenis Alibekuly

45 41 91

Almuratov Yerbulat Nurmukhambetovich

45 40 89

Mami Yerlan Yerkeshuly

27 15 55

Taygen Ruslana Aytzhankyzy

45 42 93

Krylova Tatyana Nikolayevna

24 24 100

Karbuzov Kuat Kozy-Korpeshovich

10 7 70

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Trevor Khoppkins Sparks

10 9 90

UCC management members Biographies

Oserbay Zhenis AlibekulyDate of the first and date of the current election to UCC Management : on the 04th of June in 2013, by the Decision of JSC " Samruk-Kazyna»

direction (Protocol No. 30/13). He was re-elected to UCC management by the Decision of JSC " Samruk-Kazyna» direction on the 5 th of March in 2014 (Protocol №07/14). He was appointed as a UCC Management Chairman by the Decision of JSC " Samruk-Kazyna» direction on the 6 th of June in 2016 (Protool №21/16). He was appointed as a UCC Management President by the Decision of JSC " Samruk-Kazyna» direction on the 7 th of March in 2017 (protocol №08/17) by the reason of new management staff appointment and new term of work of the UCC management members. He was appointed as a UCC Management President by the Decision of JSC " Samruk-Kazyna» direction on the 30th of March in 2018 (protocol №11/18) by the reason of new management staff appointment and new term of work of the UCC management members.

Citizenship: Republic of KazakhstanDate of birth: the 9th of May 1981Education:

Budapest State University of Economic Sciences and public Administration, International Economic relations department, Budapest (bachelor's Degree)

Kazakh economic University under the name of T. Ryskulova, International economic relations department , Almaty (bachelor's degree)

Moscow State Institute of International affairs, International economic relations department (master's Degree) Akmola University of Technology and business, oil, gas and coal Technology Department Eurasian national University under the name L. N. Gumilyov (Doctoral Studies)

Work experience (last 5 years): 2013-2016 - "United chemical company" LLP, Deputy Chairman 2009-2013 – KPI Inc., LLP.", Deputy Chairman since 2016 - "United chemical company" LLP, Chairman of the Board

The scope of questions for which he is responsible in UCC: general management of the UCC activities, exercises the functions, which are entrusted to the Chairman of the Board by the UCC Charter, decisions of a Sole Participant, the Supervisory Board

Work and membership in DB/SB of other organizations at the end of the reporting period: noOwnership of parts of UCC suppliers and competitors: no

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Almuratov Yerbulat Nurmukhambetovich Managing Director, Member of the Management BoardDate of the first and date of the current election to UCC Management : He was elected to UCC Management Board by the Decision of JSC " Samruk-Kazyna» direction on the 8th of September in 2016 (protocol No.

33/16). He was elected to the UCC Management Board by the decision of JSC " Samruk-Kazyna» direction on the 7th of March in 2017 (Protocol No. 08/17)by the reason of new management staff appointment and new term of work of the UCC management members,

Citizenship: Republic of KazakhstanDate of birth: the 24th of December in 1978Education:

Graduate School of Law "Adilet", AlmatyWork experience (for the last 5 years):

2011-2016 – LLP “United Chemical Company”, Director of the Legal Department Since 2016 - LLP “United Chemical Company”,, Managing Director, member of the Management Board

The scope of questions for which he is responsible in UCC: coordinates and controls the UCC and SDO activities on legal questions, procurement issues, including the questions off UCC and SDO RK legislation abidance, internal documents

Work and membership in СД/НС of other organizations at the end of the reporting period: Chairman of NC LLP " JV SAP Kazatomprom"; Chairman of NC LLP "HIM-Plus"

Ownership of parts of UCC suppliers and competitors: no

Taygen Ruslana Aytzhankyzy Managing Director, Member of the Management BoardDate of the first and date of the current election to UCC Management :She was elected to UCC Management Board by the Decision of JSC " Samruk-Kazyna» direction on the 18th of February in 2016 (protocol No.

06/16). She was elected to the UCC Management Board by the decision of JSC " Samruk-Kazyna» direction on the 7th of March in 2017 (Protocol No. 08/17) by the reason of new management staff appointment and new term of work of the UCC management members, She was elected to the UCC Management Board by the decision of JSC " Samruk-Kazyna» direction on the 30th of March in 2018 (Protocol No. 11/18) by the reason of new management staff appointment and new term of work of the UCC management members

Citizenship: Republic of KazakhstanDate of birth: the 11th of September in 1981

Education: Kostanay State University under the name of A. Baitursynov, Kostanay city (Law)

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Moscow humanitarian Academy, Moscow city(Economy) KIMEP University (Executive MBA)

Work experience (last 5 years): 2009-2013 – LLP "United chemical company", HR and administrative activities director 2013-2016 – LLP "United chemical company", Managing Director since 2016 -LLP "United chemical company" LLP, Managing Director, member of the Board

The scope of questions for which she is responsible in UCC :coordinates and controls the activities of UCC on strategic planning, corporate governance and development, implementation of personnel

policy, implementation of activities in the field of communications and administrative support, formation and preparation of UCC one personnel reserve for the employees nomination to the UCC and SDO high positions.

Work and membership in DB/SB of other organizations at the end of the reporting period: no

Ownership of parts of UCC suppliers and competitors: no

Mami Yerlan Yerkeshuly Managing Director, Member of the Management BoardDate of the first and date of the current election to UCC Management :He was elected to UCC Management Board by the Decision of JSC " Samruk-Kazyna» direction on the 4th of May in 2017 (protocol No. 12/17).Citizenship: Republic of KazakhstanDate of birth: the 20th of January in 1957 Education:

Kazakh Polytechnic University under the name of V. I. Lenin (Industrial and civil construction, civil engineer); Training centre LLP "International Safety Standard" (Program of the course "Safety and labour protection»)

Work experience (last 5 years): 2011-2015 –LLP “JV SAP Kazatomprom”, Director 2015-2017 –LLP “Karabatan Utility Solutions”, General Director, Chairman of the Board since 2017 -LLP "United chemical company" , Managing Director, member of the Board

The scope of questions for which she is responsible in UCC coordinates and controls UCC activities on the UCC investment and ongoing projects technological development and SDO activities Work and membership in DB/SB of other organizations at the end of the reporting period: no

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Ownership of parts of UCC suppliers and competitors: no

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Pic. UCC MANAGEMENT COMETEESInvestment CommitteeAim: to develop of recommendations to the management Board to ensure UCC investment activityChaiman:Mami E.E.Quantitative structure: 9 persons

Budget committeeAim: development of a common position of approval development plans or budgets of the subsidiaries, as well as ensuring timely and quality development of the draft development plan of the JCS and development of proposals for its adjustment and executionof UСС representatives in SDO bodies for Chaiman: Akimbayeva A.K.Quantitative structure: 5 persons

Credit committeeAim: ensuring timely and qualitative development of recommendations to the Board on issues related to the provision of loans and financial assistance and guaranteesChaiman: Akimbayeva A.K.Quantitative structure: 5 persons

Investment Committee

21 meetings41 questions

Risk committeeAim: development of recommendations to the UCC Board in the field of creation and development of risk management to the critical risk response system by developing proposals and recommendations to ensure the effectiveness of risk management system and development of processes, which can identify, monitor and control risksChaiman: Oserbay Zh. A.Quantitative structure: 7 persons

Scientific and technical CouncilAim: preparation of recommendations and proposals on scientific, scientific and technical issues of UCC activities, assessment of the state and prospects of the chemical industry of Kazakhstan, determination of promising niches for investment in the industryChaiman: Oserbay Zh. A.Quantitative structure: 21 persons

technical CouncilAim:preparation of recommendations on technical questions of investment projects implementation including project and construction of necessary infrastructure facilitiesChaiman:Mami E.E.Quantitative structure: 9 persons

Budget Committee

56 meetings56 questions

Credit committee

7 meetings9 questions

Risk committee

4 meetings4 questions

scientific and technical Council

due to the lack of questions, meetings were not held

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technical Council

4 meetings9 questions

UCC Audit Commission According to the UCC Charter the monitoring organization - is the audit Commission. The

member’s election to UCC audit Committee applies to the competence of the Sole participant.The audit Commission is an independent, permanent internal control body of UCC,

directly subordinate to the Only participant, which controls the financial and economic UCC activities, assesses the internal control and risk management, executes the documents of corporate governance and consults to improve the questions of UCC activities.

The audit Commission acts in accordance with the audit Commission Regulations, which have been approved by the decision Fund Directory on the 6th of August in 2013, according to the work plan for 2017 and unscheduled tasks of Sole Participant and the UCC Supervisory Board.

By the decision of JSC " Samruk-Kazyna» direction on the 2nd of September in 2015 (Protocol №35/15) UCC audit Committee staff has been completed, it is consists of 3 persons with a term of 3 years: audit Committee Chairman– Alimova, B. E., audit Committee members– Abdrakhmanov Zh. K., D. D. Moldybekova

During the reporting period, the audit Commission carried out the following activities: analysis and assessment of planning, financing, accounting,

procurement, personnel management system effectiveness, as well as the project schedule: LLP "Karabatan Utility Solutions", LLP "KLPE", LLP "CHIM-plus" and JSC " MC SEZ Himpark Taraz»;

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analysis and assessment of the effectiveness of the UCC structural units activity: purchase organization Department and Department of corporate Finance and Treasury;

assessment of plan implementation effectiveness to increase the value/profitability in LLP «JV SAP and LLP "Polymer Production»;

assessment of the actual state, reliability and efficiency of the internal control system and risk management system.

The annual work plan of the UCC audit Commission for 2018 year has been approved by the decision of NC UCC on the 29th of December in 2017, Protocol No. 09/17. The Annual audit Commission work plan includes the implementation of 14 inspections, which include inspections of financial and economic subsidiaries activities, as well as assessments of the effectiveness of the UCC structural unit’s activities.

3.5. COMPENSATION POLICY The size of Chairman and Management members’ salaries and remuneration is defined in

the Partnership internal document – which is the Rules of remuneration and bonuses for executives, Chairman and audit Commission members, UCC Supervisory Board Secretary, which has been approved by the UCC Supervisory Board decision in 2014.

There is a continuous monitoring of UCC executives performance, the reward, by the results of the end of the year, may be paid to Chairman and members with the aim of financial rewards for achievements and work effectiveness increase performance according to the results of performed work, which is defined by the UCC development Strategy in 2017-2026 years.

The procedure of management effectiveness activity assessing consists of the choice of motivational efficiency, setting targets, approval of motivational efficiency, performance monitoring, calculation and approval of actual performance. Cards of KPI with target points for executives for 2017 year have been approved by the Supervisory Board decision on the 5 th of July in 2017. The report of motivational efficiency implementation for 2017 year will be considered at the Partnership meeting of the Supervisory Board in the first quarter of 2018.

The procedure of activities assessment and remuneration payment is regulated by the rules of activities assessment and remuneration of the UCC management, which have been approved by the UCC Supervisory Board decision on the 6th of August in 2014.

The process of employees’ activities managing is carried out through an annual assessment of employees’ activities and interim review employees’ activities in the middle of the year. The results of the interim and annual assessment can be the basis for the employee bonus rate determining, in accordance with the rules of remuneration and bonuses of employees and the UCC development Plan for current financial year.

In accordance with the UCC Chairman order "On the assessment of the UCC administrative staff by the result of the end of 2017 year " dated om the 15 th of November of 2017 year No. 116 and the Rules of UCC administrative staff activities evaluation at the end of 2017, totally, 59 UCC members have been estimated, including 18 managerial and Supervisory staff, 41- administrative staff. In accordance with the current UCC internal documents, 6 employees of the UCC, who worked less than 6 months have been not the subject to assessment. The evaluation Commission, studied the materials of the position correspondence, which have been presented at the meeting, and presented individual recommendations to the estimated employees of UCC:

the correspondence of employee position – 59 workers; the recommendation of transfer to the personnel reserve for the

position of higher category – no; re-certification- no; discrepancy with the position – no.

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3.6. REPORT ON COMPLIANCE WITH PRINCIPLES AND RECOMMENDATIONS OF CORPORATE MANAGEMENT CODE

During 2017 year, the company carried out its activities in accordance with the corporate managing Code (hereinafter – the Code), which has been approved by the the Decision of JSC " Samruk-Kazyna» direction on the 27th of May 27 in 2015. This Code has been developed in accordance with the legislation of the Republic of Kazakhstan, internal documents of the Fund, in accordance with the ОЭСР standards, which incorporates all the best examples of international practice.

The Supervisory Board considers the compliance of the basic Code principles and recommendations to be an effective tool to improve the management of the code, aimed to ensuring its long-term and sustainable development.

UCC conducts compliance analysis of UCC current practice according to the requirements of the Code, in order to implement the Code on an annual basis. According to the analysis results in 2017, 74% of the Code provisions are observed in practice, 8% of Code provisions are partially observed, 2% of inconsistencies are revealed, 16% of Code provisions are not applicable to the Code.

Below, there is information about facts and reasons for non-compliance or partial compliance with the Code provisions in comparison with 2016 (see the table below).

Table. Information about compliance with the provisions of the corporate managing Code

Regulation / norm of the corporate managingCode

Information on partial compliance / non-compliance in 2016

Information on partial compliance / non-compliance in 2017

The Board of Directors should introduce a system of early detection and timely response to changes in the internal and external market, force majeure situations.

Partially correspondOn a quarterly basis, SB UCC considers the consolidated report of risks, the projects’ monitoring report , in which the measures to identify and respond to changes in the internal and external market conditions, force majeure situations are reflected In the context of each of the UCC projects, the target markets are constantly monitored, including the collection and analysis of main events (changes in the situation, the staff of participants and driving factors). Accordingly, updated marketing research in the context of individual projects reports are regularly discussed at the SB meetings.In order to fully comply with The code and the system implement of early detection and timely response to changes in the internal and external market, force majeure situations, it is important to study the experience of other companies (benchmarking) on the systematization and methodology of such practices.

CorrespondsCurrently, the business continuity management rules project has been developed in the UCC. These Rules apply to the risks of unforeseen situations, related to the physical threat to the UCC resources (employees, premises, technology, data), leading to the shutdown of the most important UCC activities and applies to the administrative UCC office The UCC rules on business continuity management are planned to be approved by the decision of the UCC Supervisory Board before the end of the 2nd quarter of 2018.

Other possible management mechanisms of the Holding company group include the centralization of certain functions (planning, Treasury, accounting, information technology, legal support, internal audit, etc.).

Not correspondThe feasibility of centralization of some functions will be considered under the base of the optimization results and standardization of end-to-end functions within the operational transformation (activities defined as a result of the operational transformation).

CorrespondsWithin the framework of the Transformation Roadmap in the Technology section the creation of Common service Centers (hereinafter - SSS) has been providedSet up in the Corporate University "Samruk-Kazyna" SSS in the framework of the contractual

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relationship from 01.03.2017 year, the following functions are passed : administration, employee activities assessment , administration, bulk recruitment, HR administration, payroll and social benefits administration, administration of staff training.

Holding companies must have a consolidated stakeholder map for their group and draw up an appropriate plan for interaction with Such parties.

Partially correspondsPartially matchedSince 2014, the CONSOLIDATED map of stakeholders has been approved in UCC, which determines the strategy of interaction with stakeholders. This Consolidated Map applies to all subsidiaries of UCC.The plan of stakeholder’s interaction activities is planned to be developed in the 3rd quarter of 2017.

CorrespondsUpdating of the Consolidated map of stakeholders was carried out in 2017, the action Plan for interaction with the stakeholders of the UCC group was also developed, approved by the UCC directory on the 30.06.2017 year, Protocol No. 24/17. This stakeholders UCC group cooperation Plan has been developed with the aim to establish an effective platform for productive interaction with the stakeholders, which are affected by companies at all stages of its production activities, the Plan includes 11 measures.

Zero tolerance for corruption-Corruption destroys the value that our organizations create for our shareholders, investors, other Stakeholders, and society as a whole. We declare intolerance to corruption in any of its manifestations in cooperation with all Interested parties. Officials and employees, who are involved in corruption cases, are the subject to dismissal and prosecution in the manner prescribed by law.

Partially correspondsIn accordance with the code of corporate ethics, according to CSR Policy in UCC the corruption is unacceptable in any of its manifestations, which is observed in practice.On the 29.05.2014, No. 09/14, the SB UCC approved the notification Policy of alleged infringements in UCC, which defines the main provisions aimed to regulate the procedure for applications submission about violations, their consideration, measures of their consideration, support for UCC workers and companies when they file complaints about the relevant violations within UCC group. Applications can be sent by mail, as well as through the hot line of UCC (+7 (7172) 27-71-30), or by e-mail (hotline@ucc.com.kz), which are accessible only to Authorized Persons ( UCC SB Auditor and Secretary of the Supervisory Board). The number of the hot line and the e-mail address for receiving the Applications are posted in the UCC Internet site. Over the past two years, notifications of alleged violations have not been reported.The anti-corruption and fraud policy in UCC is planned for 2017.

CorrespondsPolicy in the field of corruption and fraud in UCC is developed and approved by the decision of the SB UCC on the 14.12.2017, Protocol No. 08/17. The aims of the policy are:- elimination of causes and conditions of corruption and fraud;- prevention of corruption and fraud;- UCC employees education of strict legislative acts of the Republic of Kazakhstan compliance, as well as internal regulations, which manage the UCC activities;- Corruption factors presence prevention in the internal regulations of UCC.

The Board of Directors, Committees and members of the Board of Directors should be evaluated on an annual basis as part of a structured process approved

Not correspondSelf-assessment and independent assessment of UCC SB members was not carried out.The process of SBUCC assessment is not regulated / structured; the

CorrespondsOn the 3rd of January in 2018, the Fund sent the Methodological recommendations to estimate the activity of the Board of Directors and its committees, Chairman, members

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by the Board of Directors of the Organization. This process should be consistent with the Fund's methodology. At the same time, the evaluation is carried out at least once every three years with the assistance of an independent professional organization..

methodology of UCC assessment is absent.The document approval by the NC UCC assessment system is planned in coordination with the Fund.

of the Board of Directors and corporate Secretary of UCC Samruk-Kazyna, approved by the decision of the Board dated 14.12.2017, Protocol No. 44/17. On the basis of this Methodology, the UCC developed its internal document, which regulates the process of evaluation of NC activities, NA Chairman, NA members and the Secretary, which was previously approved by the decision of the UCC Directory Board dated 25.01.2018, Protocol No. 02/18.Currently, SB activity assessment was submitted to the SB UCC.

The head of the IAS should develop and maintain a quality assurance and improvement program, which coveres all internal audit activities and provides mandatory internal and external evaluation of the IAS activities

.Not correspondThe quality assurance and improvement programme, which covers all internal audit activities and requiring an internal and external evaluation of the audit Commission, was developed in accordance with the requirements of the International Institute of internal auditors (IIA). On the 4th of November in 2016 at the SB UCC meeting (Protocol No. 08/16) the audit Commission submitted the issue of approval of the developed guarantee and quality improvement program. However, this question was removed and sent for revision. Later this document was discussed with the staff of the Fund. Re-inclusion of this issue is planned on the 3rd quarter of 2017.

CorrespondsThe quality assurance and improvement programme, which covers all internal audit activities and requiring an internal and external evaluation of the audit Commission, was developed in accordance with the requirements of the International Institute of internal auditors (IIA). The quality assurance and improvement program was developed and approved by the decision of the Supervisory Board of the JCC dated on the 29th of December 2017, Protocol No. 17/17.This Program will be implemented with the aim to assess compliance of the audit Commission with internal audit international standards. The Programme provides the periodic internal and external evaluation, as well as evaluation of the effectiveness and efficiency of internal audit and identification of opportunities for improvement.

3.7. INFORMATION ON MAJOR TRANSACTIONS IN 2017 UCC In its activities, is guided by the internal credit policy of the Fund group and the debt

management and financial stability Policy, which have been approved by the DB of the Fund on the 7th of September in 2012.

LLP "KPI Inc." as a part of the project «Integrated gas chemical complex Construction in Atyrau region. The First phase (polypropylene production)»:

- On the 21st of November in 2017, the financial closure of the project was achieved-all the conditions for the financing opening of the State China Development Bank were fulfilled;

- On the 24th of November in 2017 the advance payment to EPC contractor– China National Chemical Engineering Co. (CNCEC) has been paid the amount of 409 million U.S. dollars;

- On the 27th of November in 2017 EPC and PMC contractor -companies CNCEC and CB&I Europe B. V. issued a notice of beginning of works.

Taking into account the advance payment EPC to the contractor, the project will start work on the detailed project and equipment purchase orders.

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According to the investment project "Construction of an integrated gas chemical complex in Atyrau region. The second phase (polyethylene production) " active measures are being taken to attract a new strategic partner, instead of the LG Chem. On the 19 th of September in 2017, the Borealis (Austria) which is a subsidiary of Mubadala Investment Company (UAE), Board of Directors made a positive decision to participate in the project. In 2018, it is planned to sign a Memorandum on the basic terms of cooperation in realization of the project between the Government of Kazakhstan, JSC "Samruk-Kazyna" and Mubadala Investment Company.

In addition, in 2017, LLP"KHIM-plus" signed a Loan agreement with the State Development Bank of China in the amount of 100 million us dollars to Finance the "production of caustic soda" project. It is expected that the financial project closure will be achieved in the 1st quarter of 2018.

In 2017, within the framework of the project "production of polymer products in Atyrau region", JSC "Samruk-Kazyna" and JSC "UCC" concluded a deal to attract 9.1 billion tenge for refinancing the current loan debt of LLP "Polymer Production" and modernization of the main production line for biaxally-oriented polypropylene pellicle production. This deal is designed to give a new stage to the development of this project.

3.8. INTERACTION WITH SUBSIDIARIES AND ASSOCIATED COMPANIESThe interaction of UCC with subsidiaries and affiliates is carried out within the framework

of corporate management where the decisions are taken by the subsidiaries bodies and affiliates (General meeting of participants/shareholders, Supervisory Board/Board of Directors, audit Commission).

The subsidiaries and branches corporate management process is governed by the following documents:

Charter of UCC; UCC Corporate management code; The charters of subsidiary and dependent organizations of the

UCC; Guidance of subsidiaries corporate management ; Other documents, which regulate UCC corporate management and

subsidiaries and associated compamies (hereinafter – the SAC).UCC Corporate management is based on the following management principles:

clear delineation of the competences and powers of SAC (GSM/GPM DB/SB Executive body), employees and officers of SAC

clear delineation of SAC responsibilities ((GSM/GPM DB/SB), SAC employees and officers.

UCC non-interference to the operating activities of SAC, management through the implementation of the rights of the shareholder/participant and through interaction with GSM/GPM DB/SB including through their representatives in the GSM/GPM DB/SB

Every year, the UCC strives to improve the level of corporate management of SAC. Every year, based on the SAC corporate management current state analysis, recommendations are developed to improve the practice and legal framework of corporate management in SAC, according to their base the plans to improve corporate governance are made.In accordance with the Charters, all SAC UCC established bodies:

The Supreme body -is the Sole shareholder/General meeting of the participants.

Management body / Supervisory body - Board of Directors/Supervisory Board;

Executive body-Board/ General Director ;75

The body which exercises the control over financial and economic activities/ Supervisory body - the audit Commission/internal audit Service.

60% of UCC SAC have corporate websites, where the information about activities, products, projects, partners, purchases, news, management of the UCC SAC is posted.

3.9. RISK MANAGEMENTThe company is aware of the risk management importance as a key component of the company's corporate management system with consolidated and separate basis, aimed to timely identification and adoption of measures to reduce the level of risks that can adversely affect to the value and reputation of the company. The risk management process in the Company is part of the daily management process.UCC Risk management on a consolidated basis is carried out at all levels of the Company, through the introduction of a Corporate risk management system (hereinafter – CRMS).The main objectives of CRMS are::

events occurrence prevent, which stopped to the achieve the strategic and operational objectives;

to reduce the impact of such events, if they occur, to an acceptable level;

effectively respond to unexpected situations and manage them; to maintain a systematic risk management process, which is a part

of the overall process of ensuring an effective internal control environment;

to provide reasonable assurance to stakeholders In UCC the documents that regulate the risk management process -are the risk management Policy and The rules of identification and assessment of risks, according to which, the company carries out the work on the identification and assessment of risks of the group of Partnership companies. The identified risks and events are systematized in the form of a register and risk map. The form and level of register detail change according to the development of the risk management system.

On an annual basis, the company develops and approves the Register and Risk Map, Risk management Plan, besides this, the Supervisory Board of the Partnership reviews of risk management reporting on a quarterly basis. UCC audit Commission conducts periodic review-analysis of problems in the CRMS (including the involvement of an external independent consultant). By the recommendations of the audit Commission, annual plans are drawn up to improve the CRMS of UCC.

In 2017 year, the UCC audit Commission assessed the effectiveness of the company's risk management Service with the following results: the overall level of evaluation of the effectiveness of the internal control system was 83.4%: "Control environment" – 85.3%, "Risk Assessment" – 76.4%, "Control procedures" – 85.3%, "Information and communication channels" – 87.5%, "Monitoring" – 100%. The overall level of CRMS was 75%: organization of risk management processes – 70,8%, risk identification - 75%, risk assessment – 75%, risk management -75%, monitoring – 81,2%.

In 2017 the following documents were developed for an effective risk management system organization, which allows to identify and timely assess potential risks, as well as within the framework of improving internal procedures and regulations in the field of risk management:- Matrix of risks and controls;

- Methodology for the key risk indicators development (KRI);

- Key risk indicators Passports for 2018;

- the Partnership Rules of business continuity management.76

In order to reduce the probability of Partnership company’s group risks, the following activities are carried out:

-measures implementation monitoring for the mitigation of key risks is carried out on a quarterly basis;

-the execution of the approved schedule of each investment project implementation is monitored on a regular basis;

-subsidiaries and affiliates activities monitoring regarding to the implementation of approved Business plans;

-the reports on Partnership companies’ groups risks are considered quarterly.

At the same time, taking into account the high probability of occurrence and a significant amount of potential damage, the following key risks and measures have been determined

Name Definition Discription Mitigation measuresCurrency risk Probability of

financial losses as a result of changes in exchange rates

The results of UCC activities, financing of projects, imported technologies and equipment, raw materials are exposed to fluctuations to the exchange rate in one way or another. When the tenge is weakening against US dollar and / or euro, the cost of technology, equipment, raw materials and the amount of debt denominated in foreign currency (principal and interest expenses) increase in tenge equivalent. Together with the fact that some of the products produced by the UCC group are sold or planned to be sold in the territory of the Republic of Kazakhstan, the weakening of the tenge's exchange rate negatively affects the net present value of the projects and, accordingly, for the long-term value of the UCC

For minimization of currency risk, UCC monitors the currency balance, conducts stress- tests of currency positions, attracts financing for projects in tenge and directs products for export to receive proceeds in foreign currency

Liquidity risk The risk of losses caused by the inability to fulfill its financial obligations

For projects with borrowed external financing, in the case of implementation delays of projects, changes in market conditions and volatility of exchange rates, it is clear that the projected cash flows will not be sufficient for financial obligations before creditors

To manage this risk, the company conducts short-term, medium-term and long-term cash flow planning, monitoring and control over the implementation of investment projects, management of accounts receivable and optimization of the debt structure

The risk of legislation changing

Risk of losses, due to the fact that the legislation was either not taken into account or changed during the implementation of projects

Most of the UCC projects are mainly implemented on basis of special economic zones, which provide infrastructure, benefits, exemption from certain taxes and other economic preferences for SEZ participants. The legislation, who regulate the activities of SEZ participants, is quite complex and is the subject to changes, due to external factors, including Kazakhstan's accession to the world Trade Organization, expansion of cooperation between the member- countries of the Eurasian economic Union, economic and political reforms in Kazakhstan. Taking into account these factors, the economic indicators of investment projects, which are implemented by the UCC in SEZ, are under risk of reduction, due to changes in legislation and the abolition of existing preferences and benefits for SEZ participants

In order to minimize this risk, the UCC continuously monitors the legislation and takes an active part in discussions of laws projects and regulations that may affect to the activities of SEZ and projects, which are located in the SEZ territory

The risk of Risk of Since the company implements projects To manage this type of risk, UCC

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emergencies at work

significant loss, destruction, damage to human health or the environment, loss of life due to an accident, a dangerous natural phenomenon, a disaster, a natural or other disaster

in the petrochemical sector, all projects in one way or another have significant risks of emergencies during production at all stages, from the beginning of construction to the operation of production facilities. The risk is increased for production, where according to the standards of the legislation of the Republic of Kazakhstan this production is considered dangerous

strictly follows after the requirements of the legislation of the Republic of Kazakhstan on industrial safety, requirements for operation and maintenance of equipment, specified in the regulatory documents of equipment manufacturers, conducts training, control and safety at production sites, implements plans for elimination of accidents and response in case of emergencies, uses insurance programs to protect the company. UCC strives for the highest standards of industrial safety and constantly improves in this regard

Risk of failure to achieve the results of investment projects

Risk of not achieving the approved parameters of the project in terms of time, quality, cost or other parameters

UCC implements various projects, the parameters of which are approved by the authorized bodies of the UCC and the Fund. Deviations from the approved parameters, that exceed the maximum permissible values, get less of operating profit and, accordingly, affect to the financial stability of the UCC group

To minimize this risk, the company strengthens technical supervision and project quality control, implements best practices in project management and attracts highly qualified personnel

Technological risk Risk of loss, which is associated with the selection of old technology/equipment and / or technology / equipment that does not meet the requirements of the project

Since the projects implemented by the UCC use different technologies and types of equipment, there is a risk that the selected technologies and/or equipment will be less effective than analogues, or will not meet the requirements of the project parameters. All this can lead to reduced economic indicators of the project.

To manage this type of risk, the company increases its technical competence, works with research centers on the territory of Kazakhstan, constantly monitoring the development of technologies and the best solutions used in the market.

The following risk management activities are planned for 2018: assessment of the effectiveness of CRMS and ICS in UCC SDO development and testing of the continuity Plan and recovery

activities of the UCC (BCR); training of UCC SDO risk coordinators (including testing); analysis of normative and work documents UCC SDO in the field

of risk management; Matrix of UCC risks and controls testing.

4. SUSTAINABLE DEVELOPMENT REPORTThe UCC activities in the field of sustainable development have systematic character and

include the creation of favorable working conditions, safety at work, environmental protection, as well as support of socio-economic development in the regions of operation. Effective interaction with stakeholders is an important condition for sustainable development of UCC. UCC pays special attention to the interests and rights of stakeholders and seeks to take into account the views and expectations of its stakeholders on a systematic manner.

In order to ensure proper and qualitative implementation of sustainable development on long term, we have developed a plan of activities in the field of sustainable development of UCC for 2017-2019 (hereinafter – the Plan). This Plan has been developed in accordance with the corporate management Code. During its development we took into account international declarations and standards (Guidelines of the Organization for economic cooperation and development for multinational enterprises (OECD Guidelines for Multinational Enterprises),

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Declaration on environment and development, adopted by the conference of the United Nations in Rio de Janeiro, 3-14 June 1992, the Global compact of the United Nations (UN Global Compact Priciples). The Plan reflects three categories of sustainable development: economic, environmental and social, with aspects and a list of activities for each.

The aims of this Plan are to implement the principles of sustainable development in the UCC and its subsidiaries for a long term, where competence and responsibility of the UCC structural units is formed for the implementation of principles, standards, relevant policies and mechanisms for sustainable development.

Sustainable development in the UCC is implemented in three directions:1) Economic component directs UCC activities to the growth of long-term value, ensuring the interests of the Sole participant and investors, improving the efficiency of processes, increasing investment to creation and development of more advanced technologies, increasing productivity.2) Environmental component provides minimization of impact on biological and physical natural systems, optimal use of limited resources, the use of environmentally, energy - and material-saving technologies, the creation of environmentally acceptable products, minimization, processing and destruction of waste. 3) Social component is focused on the principles of social responsibility, which include, among other things: ensuring the safety and health of employees, fair remuneration and respect for the rights of UCC employees, individual development of staff, the implementation of social programs for staff, the creation of new jobs.In the implementation of sustainable development activities, the UCC is guided by the

following principles: openness, accountability, transparency, ethical behavior, stakeholders interests respect, legality, human rights, intolerance of corruption, conflict inadmissibility of interests, personal example.

The full text of the principles of sustainable development is available on the official website of UCC (www.ucc.com.kz ).

The UCC activities in the field of sustainable development are regulated by the provisions of corporate management Code, as well as a number of policies, including:

Policy in the field of health, safety and environmental protection, The concept of integrated safety management system of UCC, staff policy, Corporate social responsibility policy of UCC.

The above-listed policies in the field of sustainable development, as well as Codes of corporate management and corporate ethics are placed in the public domain on the website of UCC (www.ucc.com.kz ).

4.1. ABOUT REPORTThe UCC annual report covers the period from the 1st of January to the 31st of December

of 2017.During the preparation of the Annual report, we have focused on "Guidelines for reporting

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about sustainable development" GRI G4 version, which has been developed by the international organization "Global Reporting initiative" (Global Reporting Initiative).

Taking into account the UCC activities, the nature of its impact, as well as reasonable expectations and interests of stakeholders, we were guided by the principles of determining the content of the report, while deciding what content of the Annual report should be. Taking into account the criteria of the G4 Management, which provides the company to prepare one of the two reporting options. Our Annual report is prepared in accordance with the "Main option", which mostly meets the needs of our company and allows us to meet the information needs of the stakeholders of the group.

Determination of the content and quality of the Annual reportIn the Annual report, we tried to present qualitative information, so, that stakeholders could

evaluate the UCC activities correctly and reasonably. All data, which is provided in the Annual report, are provided by the UCC structural units in accordance with the rules of UCC annual report and have not been audited by external auditors (except the Consolidated financial statements for 2017). In accordance with the" Core option", we have disclosed UCC basic information, reporting about the impact of their economic, environmental, social and corporate management activities.

Completeness-this report provides information to all areas of sustainable development of the UCC during the reporting period, in accordance with the principles, indicators and elements of GRI G4. To determine the limits of influence and significance of the aspects, we have analyzed all the significant impacts to economy, environment and society, taking into account the opinion of the UCC interested structural units, the Partnership's subsidiaries and the Sole participant. On the base of their opinions, UCC updated the Rules of preparation of the UCC annual report, where changes and additions were made in the part of the new section "Sustainable development". In accordance with these Regulations, UCC has prepared the second consolidated Annual report, which includes a report on sustainable development.

Balance – in the Annual report, we have tried to reflect not only the positive but also the negative results of our activities, so that interested parties can objectively assess the results of UCC activities during the reporting period.

Comparability-the presented in the Annual report data reveal the performance of UCC and its group over the past three years, to give stakeholders opportunity to analyze the changes in the UCC performance and to compare with other organizations.

Accuracy-the Annual report has been prepared in accordance with the GRI G4 Guidelines; we have sought to provide sufficiently accurate, specific and detailed information. Information, which reflects economic, environmental, social topics and indicators, is collected on confirmed data, for this we used both qualitative descriptions and quantitative data.

Timeliness-this report is our second Annual report, which includes a section on sustainable development, which has been prepared in accordance with the GRI G4 Guidelines. The preparation of the report is planned, including the process of development, conducting relevant dialogues with the UCC structural units,the Only participant and publication.

Clarity-we have tried to make our Annual report in a form that is understandable and accessible to stakeholders, so that they are sufficiently aware of the activities of the UCC and its subsidiaries.

Reliability-the information and processes, which are used in preparing this report have been collected and analyzed and disclosed in a manner that allows to study and ensures the quality and materiality of the information. This report has not been independently certified.

Defining report boundariesThis Annual report is our second report, which contains information on the activities of the

UCC in the field of sustainable development. Our Annual report provides the sections about UCC activities, subsidiaries and UCC structural units in all areas of sustainable development, including economic, environmental and social aspects of the impact.

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Consolidated financial data, which is presented in the Annual report, includes a list of subsidiaries of UCC – JSC "MC SEZ Khimpark Taraz", LLP " JV SAP Kazatomprom" , LLP"KHIM-plus", LLP "Polymer Production", LLP"Karabatan Utility Solutions", LLP "KLPE" LLP "KPI Inc." they were taken into account by the method of equity participation in these legal entities. The full version of the CONSOLIDATED financial statements of UCC for 2017 year, including subsidiaries and associates, is available on the corporate website of UCC www.ucc.com.kz in the "ABOUT" section.

The information regarding to the UCC plans and its subsidiaries for 2018 year is forward-looking and reflects current views on future events.

In order to prepare a qualitative report about UCC activities in the field of sustainable development and to determine the content of the report and its boundaries, we have assessed the materiality of the aspects, which are disclosed in the Annual report. In the process of determining the content of the report, the whole list of material aspects and topics have been considered, which included the specialty of UCC management, questions, which reflect the significant economic, environmental, social impact, as well as questions of human rights, impact on society, the environment, etc.

To establish the priority and importance of the aspects, we have built a materiality matrix. Important aspects were aspects, which are above the red line.

Picture. Report aspects materiality matrix

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low middle high

Influence to the UCC group

Value for stakeholders

Low, middle, high1-economic performance; 2-indirect economic impacts; 3-procurement practices; 4-materials; 5-emissions; 6-discharges and waste; 7 - compliance; 8-General information; 9 – mechanisms for filing complaints of environmental problems; 10-employment; 11-health and safety at work; 12-training and education; 13-mechanisms for filing complaints against labour practices; 14-security practices; 15-mechanisms for filing complaints of human rights violations; 16-anti-corruption; 17-competition impediment; 18 - compliance; 19-marking of products and services; 20-consumer privacy

4.2. INTERACTION WITH STAKEHOLDERSThe process of interaction organizing between UCC and stakeholders is based on the

principles of respect of all stakeholders rights, to be heard and accountable to them for their actions.

While interacting with stakeholders, the UCC adheres the following corporate principles:

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Activities: fairness and objectivity in assessing the contribution and achievements of each

respect: treating other stakeholders with respect

honesty: honesty within the UCC and to its partners

openness: openness to contacts and partners

team spirit: cooperation to achieve better results from joint activities

trust: commitment to a culture of mutual assistance and trust

Participation of stakeholders in the activities of the UCC and the determination of its long-term priorities, as well as consideration of the interests of all stakeholders is a necessary condition for the sustainable development of UCC and the implementation of its strategic goals. UCC is committed to constructive dialogue, cooperation and building mutually beneficial relations with all interested parties, focusing on the best international practices. Stakeholders can have both positive and negative impact to UCC activities, especially to the growth of value, Sustainable development, reputation and image, create or reduce risks. UCC group attaches the great importance to proper interaction with stakeholders and believes that the identification of stakeholders and the work with them- is one of the tools, that allows to improve the business reputation, investment attractiveness of UCC group, to establish effective and balanced relations with all stakeholders. The main principles and methods of interaction with stakeholders are reflected in the UCC corporate documents:

Consolidated map of the stakeholders of UCC; The code of corporate ethics; Corporate management code.

Taking into account the high requirements, which are imposed by all stakeholders, UCC seeks to protect the rights and interests of the Sole participant, as well as to take into account the interests of all stakeholders, forming and constantly improving the mechanisms and procedures of corporate management.

Thus, in 2017 year, we updated the Consolidated map of stakeholders in order to determine the range of stakeholders of UCC and the degree of their influence, as well as to systematize and visualize the information about the UCC environment and to determine the order of interaction with stakeholders.

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To assess the strength of influence and dependence, we present a list of stakeholders, indicating the areas of their influence to UCC activities.

By the degree of influence, the UCC group of companies divides stakeholders into direct and indirect.

1. Direct stakeholders – they are the objects, that have a decisive influence on the company's activities (the Only participant, investors, management body, Executive body, staff, partners, suppliers, consumers, population);

2. Indirect stakeholders – they are the persons, their associations, bodies and public groups, whose mutual influence is directly or indirectly dependent on the activities or decisions of the company (government agencies, competitors, educational and scientific institutions, public organizations, media).

The main forms (mechanisms) of interaction with stakeholders are: system of corporate communication channels; meetings, meetings, negotiations, official correspondence; joint working groups; "Hot lines" for employees and stakeholders; Presentation for investors; participation in forums, conferences, exhibitions; media interaction; membership in public associations.

The existing forms of interaction with stakeholders provide feedback, allow timely to identification the potential risks and threats, as well as new opportunities to improve the effectiveness of the UCC activities.

Based on the expert assessment of the stakeholders impact and dependence indexes of UCC activities, a Matrix of the influence and dependence of UCC stakeholders has been compiled, which determines the importance of each stakeholder. For stakeholders who will be under increasing / decreasing dependence or influence to UCC activities at near future, the forecast (expected) indicators of mutual influence change is presented, which is indicated by the corresponding direction of the arrows in the figure below:

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pic. The matrix of influence and dependence of the stakeholders of the UCC group

.

low high

the index of dependence stakeholders to UCC group

Low

High

The index of influence of stakeholders to UCC group

Note*: the arrows indicate the trend of mutual influence in the near future, taking into account the beginning of the operating UCC activities.

where: 1-the Only participant, 2-Investors, 3 - the Board of Directors / Supervisory Board, 4 – the Executive body, 5 – staff, 6 – partners, 7 – suppliers, 8 – consumers, 9 – the population, 10 – government agencies, 11 – competitors, 12 – educational and scientific institutions, 13 – public organizations, 14 – the media.

The Consolidated map of UCC stakeholders, which has been developed on the basis of the assessment of the stakeholders importance, is presented in the figure (see below). This Map

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reflects the degree of influence of the main UCC stakeholders and the degree of stakeholders dependence with UCC group.

pic. The Consolidated map of UCC stakeholders

The Only participantmass mediasocial organizationseducational and science institutionscompetitorsState BodyPopulationproduct consumerssuppliersPartnersStaffExecutive Bodyboard of Directors/ supervisory boardinvestors

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where X- is the index of interests / dependence of stakeholders from UCC activities (this value is indicated by a blue line on the map);

Y – is the index of influence of stakeholders to UCC activities (this value on the map is indicated by a red line).

The Activities, which have been carried out in the framework of interaction with stakeholders.

Within the framework of Partnership activities during 2017 year, questions, which are related with the implementation of UCC projects, which are financed by national Fund and the National budget, have been raised during the government hour by the interested parties, mainly by deputies of Parliament Majilis of RK, within the meetings of the Commission under the fraction of the "Nur Otan" party, the control of targeted and effective use of budget funds and funds, which are allocated from the national Fund; the fraction of "Nur Otan" party In the Majilis; the Council on economic policy under the "Nur Otan" party In the Majilis;

The partnership, within the framework of these meetings, held on the 12th of December in 2017, provided detailed information and reporting and analytical data about the questions, that have raised. In addition, on the 18th of January in 2018, official written answers have been sent to each Deputy to the submitted questions, comments and proposals to ensure the effectiveness of the use of budgetary funds, in the implementation of the state program projects "Nurly Zhol", namely: to the Chairman of the economic reform and regional development Committee of Parliament Majilis of the Republic Of Kazakhstan,Sabilyanov N.S.; to social and cultural development Committee Member of Parliament Mazhilis of the Republic of Kazakhstan Deputy Klimenko I. to the member of economic reform and regional development Committee of Mazhilis of the Parliament of the Republic of Kazakhstan Deputy Utebayev S. N.. to Member Of Finance and budget Committee of Mazhilis of the Parliament of the Republic of Kazakhstan Deputy Rau AP; to the member of economic reform and regional development Committee of Mazhilis of Parliament of the Republic of Kazakhstan deputy Khituov T.K.

Over the past period, we took part in working groups meetings, to review legislative initiatives, meetings of state bodies, meetings with strategic partners, we prepared a number of analytical and reference materials for the above meetings.

In addition, the investment activities reports (monthly LP-6, quarterly monitoring report of investment activities of subsidiaries and NC UCC) are sent to JSC "Samruk-Kazyna" on a regular basis.

4.3. ECONOMIC ASPECTS OF ACTIVITYUCC is committed to the creation and growth of economic benefit, through the

implementation of their investment projects into important regions of activities. The UCC economic performance allows improving the socio-economic role in the society, creating new jobs in the presence regions, and ensuring sustainable development not only of UCC and the Only participant, but also of other groups of stakeholders, which has a positive impact on their economic condition.

THE ASPECT of "ECONOMIC PERFORMANCE »

The generated direct and distributed economic value, including benefits, operating costs, employee benefits, suppliers of raw materials, capital suppliers, government, donations and other investments in communities, and retained earnings is one of the key indicators of sustainable development reporting. These figures were calculated on the base of t CONSOLIDATED financial statements of the company, which have prepared in accordance with IFRS.

The transcript of distributed direct economic valueindex 2015 г. (thousand

tenge)2016 г. (thousand

tenge)2017 г. (thousand

tenge)

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Created direct economic value, including: 18 448 962 19 973 146 29 339 147Income from sales 4 017 726 6 410 578 6 022 129Financial income 454 840 1 838 762 1 179 465Other non-operating income 13 976 396 11 723 806 22 137 553Distributed economic value -9 856 455 -12 372 497 -18 496 615Operating extras -5 965 449 -8 398 729 -9 237 673Salary and other benefits to employees -1 869 150 -1 944 040 -3 078 121Payments to capital providers -564 296 -1 830 493 -5 756 293Payments to the state -1 457 560 -199 235 -424 528Investing in local communities 0 0 0Undistributed economic value 8 592 507 7 600 649 10 842 532

Detailed information on the financial and economic UCC performance during 2016 is presented in the audited consolidated financial statements, which is posted on the corporate website of the company www.ucc.com.kz in the Section- " Company-financial statements", as well as in section 5 – "Consolidated financial statements" of this Annual report.

THE ASPECT OF "PROCUREMENT PRACTICES»The procedure of goods procurement, works and services of UCC are regulated by the

Rules of goods procurement, works and services by joint-stock company "National Welfare Fund "Samruk-Kazyna" and organizations, which have fifty and more percent of voting shares (participation shares),which directly or indirectly belong to "Samruk-Kazyna" on the right of ownership or trust management, approved by decision of JSC "Samruk-Kazyna" Board of Directors on the 28th of January in 2016 No. 126. and by the Instruction about the organization and conduct of goods procurement, works and services in UCC, which has been approved by the decision of the Board of the Partnership on the 12th of March in 2015 №10/15.

In 2017year UCC signed contracts for the purchase of goods, works and services for a total amount of 468.9 million tenge, while the share of local content is 83.1% with a plan of 40%. G4-EU9

Table. Local content of UCC goods purchase in general amount.

Period Total amount of procurements закупок,

mln. tenge

content (fact), % content (fact), %

UCC

2015 y. 426,4 86,7 42

2016 y. 1 169,2 45,1 40

2017 y. 468,9 83,1 40

UCC

2015 y. 9 549,9 58,9 38

2016 y. 11 230,7 35,3 35

2017 y. 59 235,8 31,6 30

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Significant areas of UCC activity include SEZ " National Industrial Petrochemical Technopark "in Atyrau region (Western region), SEZ" Taraz Chemical Park " in Zhambyl region (southern region), Stepnogorsk (Akmola region) and the head office of the group in Astana. Table. The proportion of local suppliers spending on in significant regions of activities implementation

index 2015 year 2016 year 2017 year

Total, according to the procurement Plan in

significant regions of activity and spent on local suppliers: 275 441 595, 0 tenge 638 914 018,5 tenge 5 615 390 226,1 tenge

Actually spent on local suppliers in significant regions

of activity:256 303 569,2 tenge

(93,1%)618 613 422,5 tenge

(96,8%)1 577 203 695,4 tenge

(20%)In order to ensure transparency of procurement procedures and the efficiency of spending

of funds, procurement by the methods of open tender and quotations, are made in the information system of Fund electronic procurement (www.tender.sk.kz ). Since November of 2017, a phased transition to the Fund's new e-procurement platform has begun (EPIS 2.0 – www.zakup.sk.kz) with advanced functionality, namely: planning, procurement (tender methods, request for quotations, one source), reporting on procurement, monitoring of contract performance. the functionality will be added to on-line explanations on procurement.

Today the reporting of procurement questions is provided through the reporting system "Electronic procurement plan and automated reporting system" and Information and analytical portal "Marketing in procurement of goods, works and services of JVS " NWF "Samruk-Kazyna". In the framework of Transformation Program implementation of the Fund's operational policies and procedures in the procurement of the Fund were revised with leading international practice. One of the innovations of 2017 year was the procurement in accordance with the Special procedure of procurement among qualified potential suppliers. Also, in 2017 year, employees of UCC procurement local Department were included to the procurement category groups at the Fund level, the purpose of these procurement category groups is to develop Procurement category strategies for the categories of "Cars and Buses", "Health insurance", "Electricity" and "Server and network equipment". By the decision of the Board of the Fund on the 22nd of August 22 in 2017 №01/17, the pilot procurement category strategy for the category "Cars and Buses" with the implementation perimeter for all subsidiaries and dependent organizations of the Holding was approved.

The result of the strategy at the end of 2017 year at the level of the Fund was the achievement of economic effect (economy) in the amount of 140.5 million tenge

Also, in accordance with the letter of the Fund from the 3rd of November in 2017 No. 02-2-09-02-2/5512, under Fund's Policy paragraph 4 about procurement management, which has been approved by the decision of the extramural meeting of the Board of Directors of the Fund on the 10th of December in 2015 No. 125, the UCC is mandated to develop the industry rules of the procurement (hereinafter – the Regulations). At the level of UCC, a working group was created to develop Regulations, by the involvement of employees of subsidiaries.

The draft regulations of the group of companies of the OHK was developed taking into account business processes and needs of the companies and is directed to coordination in Fund.

G4-12 UCC Procurement activities are carried out in accordance with the Rules of procurement of goods, works and services of the joint stock company "National Welfare Fund "Samruk-Kazyna" and organizations, which have fifty or more percent of the voting shares (shares), which directly or indirectly belong to JSC "Samruk-Kazyna" on the right of ownership or trust management, approved by the Board of Directors of JSC "Samruk-Kazyna" (hereinafter – the rules of procurement). Procurement of goods, works and services are based on the principles of:

1) transparency of the procurement process;89

2) optimal and efficient use of money for procurement;3) acquisition of quality goods, works and services;4) providing equal opportunities to all potential suppliers to participate in the procurement

process, with the support of organizations of persons with disabilities (persons with disabilities engaged in business), consisting in the Register of organizations of persons with disabilities (individuals with disabilities engaged in business) of the Holding;

5) fair competition among potential suppliers; 6) support of procurement between organizations member of the holding, with the aim of

developing intercompany cooperation;7) control and responsibility for decisions;8) minimization of the participation of intermediaries in the procurement process;9) effective implementation of investment strategic projects.The procurement process includes development and approval of procurement plans;

selection of the supplier; conclusion and execution of the procurement contract. In order to comply all basic principles of procurement, the procurement Rules contain rules, which provide the right of the customer to include qualification requirements for a potential supplier according to his experience to the tender documentation. If the purchase amount exceeds 75 million tenge, there are the requirements for the presence of a potential supplier of qualified professionals with experience in the relevant field relevant of procurement, confirmed by documents, defined by the Customer/organizer of procurement and (or) the legislation of the Republic of Kazakhstan, including relevant notarized copies of diplomas, certificates, certificates and other documents, which confirm the professional qualifications of specialists and their experience at purchasing works and services to be performed at the hazardous production facilities of the Customer. The special requirements are established for potential suppliers to provide services in accordance with the requirements of standards and (or) other documents, established by the Customer and (or) the legislation of the Republic of Kazakhstan.

4.4. ENVIRONMENTAL RESPONSIBILITY

UCC and all its subsidiaries recognize that the management of health, safety and environment (HSE) have paramount importance to the company's efficient operations. Environmental protection activities are considered as an integral part of daily work, where the need to maintain the ecological balance, ensure environmentally sustainable socio-economic development of society is fully realized. The company has successfully formulated its HSE policy, one of the key points of which is the management of the company's activities and associated risks in accordance with the requirements of national and international legislation and regulations, and the application of generally accepted industry norms and standards OHSAS 18001. Thus, health, labor and environmental protection and sustainable development are included to the evaluation of all strategic decisions and evaluation of the Company's performance.

According to the policy, the main principles of HSE management are active promotion of health, work and environment culture, where all employees and service providers set show personal example and share responsibility for ensuring high performance of HSE. Following to the principle of avoiding injuries to employees, which are directly or indirectly involved in our operations, and taking measures to protect our assets and the environment, there is the task to develop and share systems that ensure a systematic assessment of all risks in the field of HSE at all stages of our activities, as well as the use of appropriate risk management tools for employees, contractors and the public. At the same time, it is clear that there is a need to continuously reduce the negative impact of activities on the environment, identify and manage

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risks in the field of HSE, improve energy efficiency, ensure transparency and awareness. The company has an integrated environmental management system, the Foundation of which is also the current environmental legislation, the principles of environmental management and process approach. Thus, the system of management in the field of quality, environmental protection, health and safety in accordance with the requirements of ISO 14001 and OHSAS 18001 is maintained in working condition. The Policy applies to all employees of the UCC, and means the inclusion of the responsibilities and HSE requirements for UCC and subcontractors employees in contracts and job descriptions. In order to preserve ecological well-being and reduce negative impact on the environment, we plan and explore the possibilities of application and implementation of new practices and technologies together with the maintenance of existing principles.

The Aspect of "Materials»G4-EN1 spent material of granulated sulfur is 41 042 tons. Granulated sulfur is not a

renewable raw material, not re-used. Aspect " Energy» G4-EN2, G4-EN3 in the group of our subsidiaries, the technical production concept

provides for the most complete and economically feasible utilization of the energy, which is released in the exothermic reactions of the process in the form of superheated steam. All the processes, which are used in different parts of the plant, are based on specific and valuable experience, which gained as a result of research and practice during some years, it ensures the efficient operation of the entire production.

The applied technology ensures the compliance with all necessary environmental standards. Production is safe for the environment. Technical solutions, which have been adopted for this production, meet the requirements of environmental, sanitary, fire and other rules and regulations and ensure safe for life and health of people that meets international standards and regulations on environmental impact. The equipment, we use, complies with Kazakhstan standards and environmental safety standards.Electricity consumption within the UCC group organizations in 2017 has amount of 50613382kw * h. One of the future tasks of energy saving and increased energy efficiency for the group is to reduce the volume of energy consumed, including through:

reduction of energy consumption for subsidiaries and affiliates own needs;

improvement of mechanisms for monitoring energy consumption; equipping the company's facilities with metering devices for

electricity and other fuel and energy resources; organization of the process information collecting, based on the

data of the devices.It should be noted that in order to reduce the consumption of energy resources for own

needs, 9500 Gcal of thermal energy is used due to the utilization of associated gasesThe following table provides data on the energy consumption within the UCC group.

Energy consumption by the UCC group organizations Element G4 Meas.Unit volume/quantity

Energy consumption within the organization

Total electricity consumption kVt*h 35 989 917

Electricity, LLP «SAPK» kVt*h 19 616 313

The electric power LLP "Polymer Production»

kVt*h 16 373 604

Energy intensityEnergy

Total energy intensity kVt*h /t.t.p.21 4.142The energy intensity for kVt*h /t.t.p. 0.146

21 Thousand tone of production91

consumption within the organization

Energy intensity

LLP«SAPK»The energy intensity for LLP "Polymer Production»

kVt*h /t.t.p. 3.996

It should be noted, that with regard to LLP «SAPK» the plant was launched in 2015 year. It has been constructed with minimal possible energy consumption. Energy resources are monitored.

The Aspect "Water» We are aware of our social responsibility to society and the environment and we strive for

the rational use of water resources. Water is used in all production processes and is an integral part of household needs at the facilities of our subsidiaries. We understand that water is a valuable and scarce natural resource and promote a careful use of water. The total volume of water taken in 2017 year was 317 780 m3 of industrial water and 17 852 m3 of domestic drinking water. G4-EN 8 the Total volume of recycled and reused water was 3 400 m3. G4-EN10

The only sources of water, which has a significant impact of the water intake by UCC group system is the water pipelines of the state enterprise "Atyrau su Arnasy" and the river Seleta in Akmola region. G4-EN9

The Aspect "Emissions»G4-EN15 the direct gas emissions for LLP " SAPK" are apsent.In accordance with the requirements of UNO framework about "the climate change", and

the environmental legislation of Kazakhstan in 2017, LLP "Polymer Production" conducted an inventory of gases to the environment in 2016 year. The calculation of greenhouse gas emissions from the diesel generator and boiler house has been performed. The report of the inventory of greenhouse gases for 2016 has been sent and registered to the Atyrau region Ecology Department In accordance with the Decree of the Government of Kazakhstan about " the approved list of greenhouse gases that are the subject to state regulation", greenhouse gases are- carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O). According to the results of the inventory of greenhouse gases, which are emitted by diesel generator and the boiler house (a small amount), conducted in 2016 year, the emissions of these gases are stable (about 912 tons per year). That is why LLP "Polymer Production" does not fall under the requirements for the quota of greenhouse gases according to the greenhouse gas emissions quotas allocation National plan for 2016-2026 years. LLP "Polymer Production" does not emit ozone-depleting substances that affect climate change.

G4-EN 21 Harmful substances, which polluting the atmosphere in the territory of production of LLP «SAPK» are:

sulfuric acid aerosols and sulfurous anhydride in the off-gases of the final absorption tower;

diesel fuel steam, which contains saturated hydrocarbons C12-C19 and hydrogen sulfide from the tanks with diesel fuel;

sulfuric acid aerosols from the sulphuric acid warehouse, including emergency spill;

soot, nitrogen oxide, nitrogen dioxide, sulfur dioxide, carbon oxide during the heating of the combustion furnace, exhaust gases, incomplete combustion products.

Actual data: Sulfur dioxide (SO2) -0.027 t / g Carbon monoxide (CO) - 0,130 t / g Nitrogen oxides (recalculated for NO2) - 0,042 t/g

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Sulfuric acid (by H2SO4 molecule) - 0.000 t / g Carbon (soot, black carbon) -0.020 t / g Other substances (elemental sulfur) - 0.011 t / g Total volume of emissions of pollutants into the atmosphere for

2017 year is-0,237 t / year.According to the control results of the pollutants concentration, which are contained in the

organized sources emissions, they do not exceed the maximum permissible emissions for the period of 2017 year. Permanent control and monitoring of emissions to the environment is carried out to establish a system of state standards and maximum permissible impact on the components of the environment, which are necessary for the effective management of environmental protection. The main objective of the emissions environmental control is- to identify the extent of changes in environmental quality within the sanitary protection zone of the enterprise and at its border.

In "Polymer Production" LLP, according to the standards of maximum permissible emissions (MPE), stationary sources of harmful substances emissions (organized and unorganized) are defined. In order to reduce emissions from stationary sources, the operational monitoring is carried out – accounting of the number of hours of equipment each unit operation and material consumption. The reduction of emissions is confirmed by the results of industrial environmental monitoring, which has been carried out by specialized organizations. The volume of gross emissions from stationary sources in 2017 was 264 tons with the established standard of 403 tons per year.

The actual volume of gross emissions from stationary sources is: total-264 tons per year, including: solid-41 tons, gaseous-223 tons, of which hydrocarbons-0.76 tons, NOx-4.72 tons, SO2-0.16 tons"

The aspect “Effluents and waste» The reduction of the negative impact of wastewater discharge is achieved through the

treatment of industrial and domestic wastewater at specialized treatment plants. Two-stage treatment of effluents by mechanical and biological methods allows to achieve the required quality of discharged wastewater, in accordance with the norms of environmental legislation. The total volume of wastewater after biological treatment was 17,852 m3. Water disposal is carried out in accordance with the agreements, which has been concluded by specialized organizations: drainage is carried out by the service "Stepnogorsk-Vodokanal", wastewater treatment is performed by LLP "Energoservice".

LLP "Polymer Production" has two evaporation ponds with a surface area of 2700 m2 and a depth of 2.50 m-2,56 m. The Ponds-evaporators has been constructed for the discharge of treated wastewater and their subsequent evaporation. Waste waters, which are formed in the process of production activities of LLP "Polymer Production", are represented by: household and industrial waste water. The generated on the pumping station SPS wastewater is pumped to the integrated bio treatment plant. The MEGA-M-40 unit is designed to complete biological treatment of domestic wastewater, its further treatment and disinfection. In "Polymer Production" LLP, according to the standards of the maximum permissible discharges (PDS), chemical parameters of wastewater are determined. According to the results of industrial environmental monitoring, carried out by specialized organizations, the chemical analysis of wastewater in 2017 year amounted to 0.040 tons (total volume after Bio-treatment) by the established standard of 0.426 tons per year. G4-EN22

G4-EN 23 Total mass and amount of waste, which are placed at the landfill by licensed third parties for LLP «SAPK» in 2017 yeare, were:

22,425 tons per year of solid waste; 590 pieces of fluorescent lamps; 10 kg of office equipment;

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18 kg of medical waste; 90 t / g of industrial waste.

In 2017, 174 tons of waste was formed in LLP "Polymer Production". 172 tons of them are placed mon the polygones. 2 tons of waste (the spent solvent t- 1.23 tons, containers from paint and varnish materials - 0.2 t, the waste cartridge - 0,08 tn.) were handed over for re-use recycling according to the contract with LLP "Nasar Solution". While the cost of waste disposal at the landfill amounted to 4 271.5 thousand tenge, the cost of disposal - 711.1 thousand tenge. Industrial waste is stored on equipped sites and in rooms with a hard surface.

G4-EN24 The Significant spills of substances to the ground or water surface have not been detected.

G4-EN25 From the transported, imported, exported or recycled waste formed in the production process, are considered the "Hazardous" according to annexes I, II, III and IV to the Basel Convention, and according to paragraph 2 of article 287 of the RK EC.

Waste according to hazard level: "green" index G* - 172, 28 tons; "amber" index A* - 1, 23 tons; "red" index R* - missing. - classification of waste hazard levels is given in Accordance with

the environmental code of the Republic of Kazakhstan.In relation to the key biodiversity areas and associated habitats, the discharge of

organizations has no impact or negative impact. Discharges to water objects, which are recognized as particularly vulnerable due to their relative size, role or rare status, threatened or endangered system, are not carried out by our organizations. G4-EN26

G4-EN 29 In LLP “Polymer Production”, on the April of 2017 year, an unscheduled environmental audit was conducted for the period from the 1st of January to the 31st of December in 2016. According to the results of the audit an administrative fine of 50 MCI in the amount of 113 450 tenge was imposed for non-compliance with paragraph 9.1 "Implementation of management systems according to international standards OHSAS 18001: 2007 " Environmental action Plan, agreed with the Department of ecology of Atyrau region

Actual data on discharges and waste

Maximum permissible concentrations of wastewater-suspended solids

мg/l 140

Chemical oxygen demand мg/l 140,1Biochemical oxygen demand мg/l 67,7Ammonium nitrogen мg/l 18,0Mineral oils мg/l 0,3Synthetic surfactants мg/l 0,25

Solids мg/l 1000Iron мg/l 1,5Chrome мg/l 0,04Copper мg/l 0,05Zinc мg/l 0,06Chlorides мg/l 238,0Nitrates мg/l 0,9Phosphates мg/l 2,0Lead мg/l 0,004Aluminum мg/l 0,14

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Hydrogen index рН 6,5-8,5

Soluble oxygen мg/l 5-11,2

There is no impact of the object to the surface waters, which have fishery or cultural and domestic importance. The company is located outside water protection zones. Impacts on water resources are considered as acceptable.

Aspect "General information»G4-EN31. Total environmental costs and investmentsWe recognize that industrial waste management is one of the environmental priorities of

government bodies, economic entities and local communities. In order to prevent and mitigate environmental impact and environmental management system, various activities, which are related with waste are carried out at all subsidiaries and affiliates. Such as management and treatment of emissions and discharges, as well as measures to prevent environmental impact.

The total cost of environmental protection in 2017 year was 12 436, 669 thousand tenge, including:

Expenses, associated with waste production and consumption– 5 552, 820 thousand tenge;

expenses for prevention of environmental impact and environmental management system – 6 883, 849 thousand tenge, including:

- protection of the air pool-4 694, 962 thousand tenge; - expenses on landscaping – 520,570 thousand tenge; -introduction of management systems and best safe technologies-14,

000 thousand tenge; -environmental education and promotion-362, 736 thousand tenge; - expenses for mandatory environmental insurance-227, 581 thousand

tenge; - expenses of environmental monitoring – 1 064 0 thousand tenge.It should be noted that there were no complaints for violation of the environmentPayments for environmental violations, including fines, in the form of charges for excess

emissions into the environment, excess discharges of pollutants, unauthorized disposal of waste are absent.

The UCC future plans include the full implementation of HLES Policy, development and implementation of waste management plans in subsidiaries and affiliates. The indicator of the implementation of these action plans will serve to improve the quality of environmental management and the gradual reduction of waste management costs.

At the same time, we inform that the total cost of environmental protection in 2017 for LLP " SAPK», was 5 341, 932 thousand tenge, including:

expenses, associated with waste production and consumption - 570, 235 thousand tenge;

protection of the air pool-4 694, 962 thousand tenge; introduction of management systems and best safe technologies-

14, 000 thousand tenge; environmental education and promotion – 362, 736 thousand

tenge.While for LLP "Polymer Production» they were:

landscaping expenses– 520, 570 thousand tenge; waste management expenses - 4 982, 585 thousand tenge; expenses for mandatory environmental insurance-227, 581

thousand tenge;

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environmental monitoring expenses– 1 064 0 thousand tenge.There is no Committee on health and safety at work. The Service of health, labor and

environment in LLP "Polymer Production" includes 2 people, a Representative of the number of employees - 1 person.

Health and safety at workLA5 LA6 LA7 LA8 Percentage of total staff represented in official joint committees for health and safety with participation of representatives of management and employees, involved in monitoring and formulating recommendations for programs on health and safety in the workplace

The types and level of production traumatism, level of professional diseases, coefficient of lost days and factor of absence, and the total number of deaths associated with work, by region and sex

Workers with high injury and high risk of illness depending with their occupation

Reflection of health and safety issues in formal agreements with trade unionsпрофсоюзам

3 people 1 people - -There is no Committee on health and safety at work. The Service of health, labor and environment in LLP "Polymer Production" includes 2 people, a Representative of the number of employees - 1 person.

1 accident, a slight degree of injury. Occupational diseases are not registered. No deaths.

There is no high risk of injury and morbidity.

No trade unions

4.5. SOCIAL RESPONSIBILITYAccording to the UCC development Strategy, one of the main strategic directions of

development is social responsibility. In order to ensure sustainable development, special attention is paid to the following

priority areas in the field of corporate social responsibility: formation of an effective system of training and personnel

development; ensuring environmental sustainability and safety at work.

In 2013, the company adopted a policy in the field of corporate social responsibility in order to further improvement of effectiveness of the company's activities in this area.

The adoption of this Policy has allowed us to systematize the UCC group activities in the field of corporate social responsibility, to strengthen trusting relationships with stakeholders. We focus all our potential to the implementation of best corporate management practices, innovative processes and technologies promotion, creation of conditions for UCC investment activity. Our employees- are our main value and main resource. Their level of professionalism and security directly affects to our results of operations and added value. So we:

we attract professional candidates from the labor market on an open and transparent basis, develop our employees by meritocracy principle;

ensure the safety and health of our employees;

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we conduct health programs and provide social support to employees;

we create an effective system of motivation and development of employees;

we promote a corporate culture.

Aspect " Health and safety in the workplace»The group of UCC companies highly values the health and safety of workers.The main provisions and objectives of the UCC group provide mandatory compliance with

all existing norms and standards in the field of labor protection, which is an essential condition for the successful development of modern business. Thus, in 2017 year, the training and of knowledge verification on industrial safety were held in the UCC subsidiaries.

Within the framework of corporate social responsibility, the necessary conditions for the work of employees have been created. In accordance with the Rules of providing social support to UCC employees, the material assistance has been created for recovery during annual paid vacations, in connection with the birth/ adoption of a child, in connection with the death of an employee/ relatives, other compensation payments and voluntary medical insurance in case of illness of an employee and his family members.

In order to maintain and improve the physical and psychological health of the employees we will continue the implementation of voluntary insurance in case of illness of employees and family members. Expenses for this article in 2017 year was - 99 486 843 tenge, with a plan of -170 403 698 tenge, in 2016 year – 106 526 944 tenge ,with a plan of -147 143 380 tenge. The expenses for compulsory insurance of employees against accidents at working place in 2017 year were - 15 275 538 tenge, with the plan of -49 283 917 tenge, in 2016 year – 13 947 306 tenge ,with the plan of -18 538 332 tenge.

We are constantly working to create safe working conditions, reduce injuries during technological operations, improve production and sanitary conditions of workers, as well as to reduce the impact of harmful and adverse factors.

When hiring, as well as during the year, on a regular basis, there is an acquaintance with the internal normative documents, which regulate the system of labor protection and safety in the company. Before the admission to the workplace all contractor employees have acquaintance with an induction and initial orientation. Primary instructing on a workplace is giving to each worker with practical display of safe receptions of work (is made out in the magazine of instructing in the section "registration of primary instructing on a workplace"). Daily the contractor’s employees are instructed on the target, where safety measures, dangerous and harmful production factors available at the facility of the subsidiaries are indicated.

For professions with harmful working conditions, an additional payment for the time of actual work in harmful working conditions is made; additional days to vacations are determined and special food is issued. Employees are certified for the right to work in the field of industrial safety. Every year, action plans are developed to eliminate or reduce the damaging effects of hazardous production factors , by the results of the industrial safety inspection and certification of workplaces.

To monitor the health of employees, medical examinations were carried out in 2016 year. According to the established standards, employees are provided with the necessary personal protective equipment, including electrical protection, special food, medicines. In 2016 year, there were no cases of UCC employees occupational diseases.

Human resources policy One of the functional documents of UCC in the field of human resources management is the Human resources policy for 2013-2022 years, which has been approved by the decision of the Supervisory Board in October of 2013. The UCC Human resources policy was developed on the

97

basis of The Fund Human resources and implemented in accordance with the legislation of the Republic of Kazakhstan. The mission of the HR policy is to provide the necessary number of staff with proper qualifications and motivation to work for the implementation of The company's Strategy. The vision of the Human resources policy- is an effective corporate culture of the Company, which is focused on achieving high results, meritocracy and innovation. Besides this, UCC adheres to the principles of the UN Global compact, such as:

elimination of all forms of forced and compulsory labour; prevent the use of child forced labour; non-discrimination in any form.

The key areas in accordance with the UCC human resources policy are: improving the quality of the workforce; labor efficiency management; corporate culture development; management of organizational structure, effective organization of

business processes.UCC implements human resources policy, which is aimed to provide the employees with

decent wages, social guarantees, conditions for self-realization and development. On a regular basis, human resources audit of subsidiaries and affiliates is carried out. Based on the results of the human resources audit, recommendations are made to improve the HR processes of SDO and to comply with corporate HR policy.

The questions o labor organization and labor relations are regulated by the Internal labor regulations, employment contracts. A number of adaptation procedures have been developed for newly hired employees. To encourage employees, a system of non-financial incentives has been introduced. Employee incentives are also implemented through a system of individual employee development plans, on the basis of which periodic performance evaluation and bonuses are conducted. Annual seminars are held to implement the Provisions of the Code of corporate ethics. The UCC implements a HR reserve program, which is aimed to replace internal key positions. Mechanisms of workers social support (compensation of housing for invited workers, health insurance, financial assistance for health improvement) were developed. Timely measures are taken to prevent protest moods, labor disputes (timely payment of labor, respect for the interests of employees in creating working conditions, including in relation to nursing mothers, the absence of facts of illegal dismissal of employees, fair wages, annual assessment of staff involvement).

The Aspect "Employment» G4-9 the Actual number of UCC employees over the past three years is:

in 2015 – 650 people, including production staff-331 people, administrative and managerial staff-319 people;

in 2016 – 793 people, including production staff-437 people, administrative and managerial staff-356 people;

in 2017 – 953 people, including production staff-600 people, administrative and managerial staff-353 people.

The average number of UCC and SDO staff in 2017 year was - 903 units (in 2015 – 712 units, in 2016 – 752 units.)

During the reporting period, 204 employment contracts with employees were terminated by agreement of the parties, including 18 employees were transferred to the Fund group.

The total number of structural units over the past three years is as follows: in 2015 – 105 structural subdivisions; in 2016 – 113 structural units; in 2017 – 133 divisions.

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The actual number by region and the total number of structural units for 2017 year is presented in the following table:

The actual number of emploees the total number of structural units

Западный регион* Южный регион* Астана*0

100

200

300

400

500

600511

147

295

6033 40

фактическая численность сотружниковобщее количество структурных подразделений

West region south region Astana*Western region – LLP "KPI Inc.", Too "KUS", LLP " Polymer Production»;*Southern region – LLP "KHIM-plus", LLP " JV SAP "Taraz chemical Park»;*Astana – the Corporate center, LLP " JV SAP Kazatomprom" LLP, "KLPE".

G4-10 the Actual number of employees by employment contract and sex for 2017 year is:

99

Фактическая численность сотрудников

Мужчины Женщины0

100

200

300

400

500

600

700

800

900

1000953

659

294

Actual number of permanent staff Men Women

Actual number of permanent staff by type of employment and sex over the past three years:

2015 year 2016 year 2017 year

Полная занятость (мужчины)

Частичная занятость (мужчины)

Полная занятость (женщины)

Частичная занятость (женщины)

0

100

200

300

400

500

600

700

455

3

192

0

548

3

242

0

658

1

293

1

2015 год 2016 год 2017 год

Full time employment part time employment full time employment part time employment Men men women women

The actual labor force according to region and sex in 2017 year is as follows:

100

Men women

Западный регион* Южный регион* Астана*0

50

100

150

200

250

300

350339

108

212

172

39

83

Мужчины Женщины

Western region Southern region Astana

*Western region – LLP "KPI Inc.", LLP "KUS", LLP " Polymer Production»;*Southern region – LLP "KHIM-plus", JSC " JV SAP "Taraz chemical Park»;*Astana – the Corporate center, LLP " JV SAP Kazatomprom" LLP, "KLPE".

The actual number of employees, according to staff and non-staff, as well as by gender, is presented in the following table:

men Womenperiod Staff member Freelancer staff non-staff

2015 year 434 1 216 42016 year 551 1 242 42017 year 659 2 294 5

G4-LA1 Total number of new employees, as well as staff turnover according to age group and sex for 2017 year is as follows:

Общее количество вновь нанятых сотрудников

Штатная численность

Среднесписочная численность

Уволенные мужчины

Уволенные женщины

20-30 лет

30-40 лет

40-50 лет

50-60 лет

60-70 лет

0 200 400 600 800 1000 1200 1400

368

1288

903

186

78

92

84

52

31

5

60-70 years old30-40 years old

101

Retired womenRetired menMiddle numberStaff numberTotal number of new employees

At the same time, the percentage of newly hired employees is 38.61%, turnover – 29.24%.

The total number of newly hired employees, as well as staff turnover according the age group, sex and region for 2017 year is as follows:

Astana southern region western region

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Общее количество вновь нанятых сотрудников

Штатная численность

Среднесписочная численность

Уволенные мужчины

Уволенные женщины

20-30 лет

30-40 лет

40-50 лет

50-60 лет

60-70 лет

0 100 200 300 400 500 600 700

213

629

475

93

40

50

49

18

13

3

58

303

126

27

10

10

12

8

6

1

97

356

302

66

28

32

23

26

12

1

Астана* Южный регион* Западный регион*

60-70 years old

30-40 years old

Retired women

Retired men

Middle number

Staff number

Total number of new employees*Western region – LLP "KPI Inc.", LLP "KUS", LLP " Polymer Production»;

*Southern region – LLP "KHIM-plus", JSC " УК СЭЗ "Taraz chemical Park»;

*Astana – the Corporate center, LLP " СП СКЗ Kazatomprom" LLP, "KLPE".

At the same time, the percentage of newly hired employees and turnover by region for 2017 is:

Western region Southern region Аstanapercentage of newly hired employees 41.68% 39.46% 32.88%

turnover 28% 29.37% 31.13%

G4-LA3 the Percentage of staff returning from maternity/paternity leave from work, as well as the percentage remaining in the organization after maternity/paternity leave, on the basis of gender, over the past three years, is as follows:

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2015 year 2016 year 2017 yearNumber of employees, which is the subject to rules, agreements or contracts of the organization providing for maternity/paternity leave

341 441 1 288

Number of employees who took maternity/paternity leave in the reporting period 3 9 18

Number of employees who returned to work during the reporting period after maternity/paternity leave 3 2 3Number of employees stay at work after 12 months 3 4 5Number of employees who had to return to work at the end of maternity/paternity leave - - 8

Training and education aspect»G4-LA9 In the UCC on an ongoing basis there is a comprehensive increase of

professionalism, which consists of the development of professional thinking and consciousness, through participation in internships, seminars, conferences, forums, exhibitions, symposia, round tables, webinars, training in the workplace, training programs related to the implementation of UCC projects, adaptive training. In accordance with the Rules of professional training and development of employees, employees have the opportunity to improve their level of education and skills.

The average annual number of training hours per employee during the reporting period is presented in the context of the last three years:

G4-LA11 Percentage of all staff members (by gender and category) that have undergone a formal performance evaluation during the reporting period:

2017 year 2016 year 2015 year

высшее руководство (члены Правления) мужчины

высшее руководство (члены Правления) женщины

среднее руководство (управляющий директор, руководители структурных подразделений)

мужчины

среднее руководство (управляющий директор, руководители структурных подразделений)

женщины

административный персонал (мужчины)

административный персонал (женщины)

0.0% 50.0% 100.0%

53.3%

44.4%

90.3%

77.4%

85.0%

79.0%

8%

0%

84%

86%

78%

90%

0%

0%

77%

92%

82%

76%

2017 год 2016 год 2015 год

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Administrative staff (men)Middle level administration (executive director, structural department’s mangers)Middle level administration (executive director, structural department’s mangers)High level administration ( directory members) womenHigh level administration ( directory members) men

In 2017, 77 employees of UCC took part in individual training events (in 2015 – 39 employees, in 2016 – 74 employees). Corporate seminars were organized on the following topics:

Organizational design: a workshop on building a targeted organizational structure;

The art of empathy-individual approach to communication and business;

Non-rhetoric business presentation skills; Team coaching; expenses reduction, improving of productivity and quality. The

concept of lean manufacturing (Kaydzen); Applying anticorruption legislation of the Republic of Kazakhstan; Project management practice based on PMI PMBOK guide 5th

Edition standard, basic course; Certification status of IPMA Level C and D.

In addition, courses to improve the level of knowledge of the State and English languages are held on an annual basis for the UCC staff.

In order to perform quality implementation of the sustainable development principles process the employees of UCC separate structural divisions have been trained on the theme "Reporting on sustainable development in accordance with the GRI guidelines". And also, on the 14th of June in 2017, the UCC employees took part in the session on Sustainable development and corporate social responsibility of energy corporations. At this session, the experts talked about how much the conflict with the public will cost to the companies, and how to implement corporate volunteering in large companies.

The development of the USS staff training costs in 2017 year -69 832 thousand tenge, by the plan -72 127 thousand tenge (in 2015 – 32 831 thousand tenge, by the plan- 34 724 thousand tenge, in 2016 – 63 985 thousand tenge, by the plan of 64 339 thousand tenge).

In 2018, it is planned to carry out 100% participation of employees in training activities to improve skills in accordance with Individual development plans and the development of the expenses for training and retraining of UCC employees - 51,401 thousand tenge.

In 2017, under the auspices of JSC "Samruk-Kazyna", the Partnership launched the internship program "Zhas Orken", which is aimed to create a pool of HIPO candidates, improve the reputation and brand of the company, develope a culture of systemic personal and professional growth, involvement of the mentor and his team.

In order to successfully implement of this program, the following member companies were identified: JSC " MC SEZ "Himpark Taraz", LLP " JV SAP Kazatomprom", LLP "Polymer Production" and from the experienced and highly qualified employees of UCC the mentors have been appointed.

Aspect "Mechanisms of complaints against the practice of labor relations»In order to identify the main provisions to regulate application of violations and order of

their consideration, the adoption of measures according to the results of their examination, and establishing the basis for support of UCC employees, there is the Policy of notification about alleged violations. The purpose of this Policy is to establish the foundations for greater transparency and reporting in UCC activities, by providing opportunities for UCC employees for

105

responsibly to express their concerns, related with a practice, that violate the applicable laws or UCC internal documents,

Notices of alleged violations in accordance with this UCC Policy are sent directly to the authorized persons-the UCC audit Commission and the Ombudsman, by mail, as well as by the UCC hotline– (+7 (7172) 73-71-58), or by email (hotline@ucc.com.kz ).

In management practice, the UCC Board and all its structural units do not prevent the transmission of notifications of alleged violations to authorized persons.

This Policy is not applied while applications considering in accordance with the law of the Republic of Kazakhstan about "the procedure for consideration of appeals of individuals and legal entities".

Appeals and complaints on the fact of violation by the UCC and interested parties staff have not been received till present time.

5.CONSOLIDATED FINANCIAL STATEMENT

5.1 AUDIT REPORTS

To Participant and Management of LLP "United chemical company"

Opinion

We have audited the consolidated financial report of LLP "United chemical company" and its subsidiaries (the "Group"), which consists of the consolidated statement of financial state on the 31th of December in 2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows during the year and notes to the consolidated financial statements, including a brief overview of the main provisions of accounting policy.

In our opinion, the accompanying consolidated financial statements reflect reliably in all material aspects, the consolidated financial position of UCC Group on the state of the 31 st of December in 2017, and its consolidated financial results and cash flows during the year in accordance with International financial reporting standards (IFRS).

The basis for expressing an opinion

We conducted our audit in accordance with International standards on auditing (ISA). Our responsibilities under these standards are further described in the auditor's Responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the professional accountants Council code of ethics by international standards of ethics for accountants (the CISEA Code), and we have fulfilled other ethical obligations according to CISEA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to serve as a base for our audit.

Management's responsibility for the consolidated financial statements

Management of the Group is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with ISFR, and the internal control, which management determines to be necessary for preparation of the consolidated financial statements that are free from material misstatement as a result of mistakes.

In preparing the consolidated financial statements management is responsible for assessing the Group's ability to continue its operations continuously, to open the appropriate information, which is related to business continuity, and for the consolidated financial statements, based on assumptions about the continuity of the activities, except the cases ,when management intends to liquidate the Group, to stop its activities, or when he has no real alternatives to such actions.

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Auditor's responsibility for the consolidated financial statements audit.

Our aims are to obtain reasonable assurance that the consolidated financial statements as a whole are free from material misstatement, because of mistakes. In audit report, that includes our opinion, reasonable assurance is- a high degree of confidence, but is not a guarantee that an audit, which has been conducted in accordance with International audit standards, will always detect material misstatement, if they are present. Misstatements can be the results of mistakes and they are considered be material if, they could reasonably be expected to influence the economic decisions of users, which have been taken on the basis of these consolidated financial statements.

As a part of audit in accordance with International audit standards, we exercise professional judgment and maintain professional skepticism throughout the audit. In addition, we perform the following:

identify and assess the risks of material misstatement of the consolidated financial statements, as a result of mistakes; develop and perform audit procedures in response to those risks; obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of undetected material misstatement as a result of mistakes, is higher than the risk of undetected material misstatements due to errors. Which can involve collusion, forgery, deliberate omission, distorted the presentation of information or action in circumvention of the internal control system;

obtain an understanding of internal control, which is relevant to audit in order to form audit procedures, which are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control;

assess the appropriate character of applied audit policy . we come to conclusion that the management assumptions about the continuity of

the activities is legal, and based on the audit evidence the conclusion whether there is substantial uncertainty in connection with events or conditions that may raise significant doubts in the ability of the Group to continue its activities continuously. If we conclude that there is material uncertainty, we should draw attention to the relevant disclosures of information in the consolidated financial statements or, if such disclosures are inappropriate, modify our opinion in our audit report. Our findings are based on audit evidence, which have been obtained prior to the date of our audit report. However, future events or conditions can lead to the fact, that the Group will lose the ability to continue their activities continuously;

assess the presentation, structure and content of the consolidated financial statements, including disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that ensures fair presentation;

obtain the sufficient appropriate audit evidence about the financial information of the organizations and the business activities of the Group, to express an opinion about consolidated financial statements. We are responsible for the overall management, control and audit of the Group. We are solely responsible for our audit opinion.

We carry out information interaction with the persons, which are responsible for corporate management, bringing to their attention, among other things, information about the planned scope and timing of the audit, as well as significant comments according the results of the audit, including significant shortcomings of the internal control system, if we identify those in the audit process.

107

Bahtiyor Eshonkulov

Auditor/audit partner

Qualified auditor’s certificate

GulmiraTurmagambetova LLP “Ernst and Young”

General Director

№ MF -0000099 on the 27th of August in 2012 year.

050060, Republik of Kazakhstan

State license to produce audit

activity on the territory of Kazakhstan

Almaty city,77/7

“Yessentay Tower” building

The 9th of February in 2018 year.

MFU-2 № 0000003

Issued by the Ministry of FinanceOf Republic of Kazakhstan

On the 5th of July in 2015 year

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5.2 FINANCIAL REPORT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For one year, which end on the 31st of December 2017 y.In thousand of tenge Ex. 2017 year 2016 year

Income from sales 5 6.022.129 6.410.578Cost of sales 6 (5.347.348) (5.047.494)Gross profit 674.781 1.363.084

General and administrative expenses 7 (5.104.474) (3.943.768)Sale expenses (412.682) (241.238)Operating loss (4.842.375) (2.821.922)

Financial income 18 1.179.465 1.838.762Financial expenses 18 (5.756.293) (1.830.493)Foreign exchange loss (1.451.290) (320.598)Share in loss of associates and joint ventures 11 (308.562) (4.277.106)Provision for onerous obligation 16 (4.181.837) (582.108)Recovery income/(impairment loss) 53.590 (57.721)Other non-operating income / (expenses), net 19 26.574.362 15.851.070Profit before tax 11.267.060 7.799.884

Income tax expense 8 (424.528) (199.235)Net profit of the year 10.842.532 7.600.649

Other comprehensive income of the year – –Total income of the year, net of taxes 10.842.532 7.600.649

Total comprehensive income attributable to:Member of Parent company 10.865.458 7.546.556

Non-controlling interests (22.926) 54.09310.842.532 7.600.649

Acting finance director Aimbayeva A.KHead accountant Takezhanova B.K

Stamp: LLP “United chemical company”

109

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For one year, the state on the 31st of December 2017 y.In thousands tenge ex. 2017 year 2016 year

AssetsLong-term assetsNet value of property, plant and equipment, excluding provision for onerous liability 207.492.653 103.453.055Less: use of reserve 16,9 (87.174.206) (46.043.840)Balance of property, plant and equipment 9 120.318.447 57.409.215Intangible asset 4 43.160.585 158.342Advance payment for long term assets 10 159.465.912 31.836.495Organizations and joint ventures Investments 11 633.510 33.493.255Long-term VAT recoverable 12.993.022 7.199.553Receivables – 118.078Other long term assets 1.811.641 737.394Cash restricted in use 13 23.739.239 38.145.747

  362.122.356 169.098.079Current assetsInventories 1.552.126 1.378.406Debts and other assets 2.227.656 1.272.080Short-term VAT recoverable 296.810 271.066Advance payment of corporate income tax 606.064 108.666Funds in credit institutions 12 144.254 2.844.107Cash restricted in use 13 3.244.884 3.274.508Cash and its equivalents 14 62.063.987 47.648.368

70.135.781 56.797.201Long term assets held for sale 238.658 –Total assets 432.496.795 225.895.280Capital and liabilitiesCapital Authorized capital 15 260.693.548 233.515.621Additional paid-in capital 15 3.823.348 4.164.225Accumulated loss (59.518.764) (72.226.046)Capital attributable to a member of the parent company 204.998.132 165.453.800

Non-controlling parts of particapation 15 57.114.626 778.989Total cappital 262.112.758 166.232.789Long term liabilitiescredits 17 147.414.999 9.285.607Procent to pay 17 456.473 425.042Credit debt 726.027 210.935Deferred tax liability 8 98.123 –

148.695.622 9.921.584Current liabilitiesCredit debt 14.759.234 6.289.221Short-term part of long-term loans 17 1.198.037 1.882.036Procent to pay 17 1.337.814 629.648Tax to pay 48.002 117.660Provision for onerous obligation 16 1.224.333 38.046.659Other reservs 16 2.170.163 2.186.839Other obligations 950.832 588.844

21.688.415 49.740.907Total liabilities 170.384.037 59.662.491Total capital and liabilities 432.496.795 225.895.280

110

Acting finance director Aimbayeva A.KHead accountant Takezhanova B.K

Stamp: LLP “United chemical company”

CONSOLIDATED STATEMENT OF CASH FLOWS

For one year, the state on the 31st of December 2017 y.In thousands tenge Ex. 2017 year 2016 year

Cash flows from operating activitiesProfit before tax 11.267.060 7.799.884

Corection onDepreciation and amortization 6,7,19 1.153.660 911.946

Financial income 18 (1.179.465) (1.838.762)Financial expenses 18 5.756.293 1.830.493

Changes in provisions for doubtful debts, impairment of advances issued and illiquid PFS 7 (5.530) 46.816

Impairment loss (53.590) 57.721Provision for onerous obligation 16 4.181.837 582.108Loss in main assets 19 3.362 1.883Unrealized exchange rate difference, net 1.459.164 39.423Income from beneficial acquisition of participation share 4,19 (26.448.634) (15.573.605)Share in loss of associates and joint ventures 11 308.562 4.277.106

(3.557.281) (1.864.987)

Change in inventories 173.720 (995.473)Changes in receivables and other assets 837.498 (3.730.337)The change in deferred commissions on loans – (300.848)Changes in VAT recoverable and other long-term assets 6.287.238 (913.830)Change in credits debts (10.956.144) 3.557.125Change in taxes payable (246.025) (139.475)Change in other current liabilities (289.486) 151.181

(7.750.480) (4.236.644)

Income tax paid (212.789) (1.592.451)Percentage Received 18 937.518 432.242Percentage paid 17 (997.126) (1.249.845)

Net cash used in operating activities (8.022.877) (6.646.698)

Cash flows from investing activitiesAcquisition of main assets (23.790.985) (9.725.742)

Advances paid for main assets 10 (134.970.000) (4.345.038)Acquisition of intangible assets (21.194) (91.466)

Acquisition of investments in associates and joint ventures 11 (212.029) (321.340)Proceeds from disposal of main assets 14.757 7.731Proceeds from disposal of associates 7 –

Placement of funds in credit institutions (44.776.423) (10.822.811)Withdrawal of funds from credit institutions 64.161.260 12.145.208

111

Cash restricted in use (1.887.796) (5.098.105)Return of part of the authorized capital of KLPE 11 – 12.495.080

Net cash at acquisition of subsidiary 4 243.471 977.559Dividends from associates and joint ventures 11 – 422Net use of cash in investing activities (141.238.932) (4.778.502)

In thousands tenge ex. 2017 year 2016 year

Cash flows from financing activitiesShare capital contribution 15 27.177.927 33.674.646The flow of Bank loans 22 144.798.905 1.826.782Repayment of Bank loans 22 (8.709.902) (4.621.461)Net cash flows from financing activities 163.266.930 30.879.967Net increase in cash and its equivalents 14.005.121 19.454.767Effect of changes in exchange rates on cash and its equivalents 410.498 49.450Cash and its equivalents, on the beginning of the year 14 47.648.368 28.144.151Cash and its equivalents, on the end of year 14 62.063.987 47.648.368

SIGNIFICANT NON-CASH TRANSACTION – ADDITIONAL DISCLOSUREСледующие

significant non-cash transactions were excluded from the consolidated statement of cash flows:

In 2017, the Group recognized a net decrease in the provision for onerous liability in the amount of KZT 1,681,549 thousand tenge (2016: increase on KZT 58,470,281 thousand) for the construction of a gas turbine power plant according to the project of LLP "Karabatan Utility Solutions". 3,897,000 thousand tenge (2016 year: zero ) was recognized in the consolidated statement of comprehensive income, and the amount of 5,578,549 thousand tenge(2016 year: 58,470,281 thousand tange) was recognized as other transactions with the Participant in the consolidated statement of comprehensive income in capital flows due to the transfer of the technical gases project. As a result of this accumulated reserve, the Group also reduced the carrying value of the unfinished capital construction of LLP "Karabatan Utility Solutions" to the amount of 36,652,988 thousand tenge (2016 year : 27,385,957 thousand tenge). (Notes 9, 16).

In 2017, the Group also recognized the additional provision for an onerous obligation on a net amount of 1.713.520 thousand tenge (2016: 486.498 thousand tenge) for the project of FEZ infrastructure construction of Chemical Park Taraz, including the amount of 284.837 thousand tenge (2016 year: 486.498 thousand tenge) was recognized in the consolidated statement of comprehensive income. The amount of 1.428.683 thousand tenge was recognized as other transactions with a Party in the consolidated statement of cash flows. Due to this accumulated reserve, the Group also reduced the carrying value of the unfinished capital construction of the chemical Park Taraz of 4,477,378 thousand tenge (2016: 2,314,961 thousand tenge). (Notes 9, 16).

During the year, the Group also acquired fixed assets and has paied the debt by offset against advances paid for long-term assets in 2015 in the amount of KZT 41.620.691 thousand (2016 yera: 19.672.924 thousand tenge).

112

Acting finance director Aimbayeva A.KHead accountant Takezhanova B.K

Stamp: LLP “United chemical company”

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CONSOLIDATED STATEMENT OF CHANGES IN CAPITALFor one year, the state on the 31st of December 2017 y.

ForParent company member

In thousands tenge Ex.

Assosoation articles

asset

Additional paid-in capital

Accumulated

loss Total

Non-controlling

interestsTotal

capiltal

On the 1st of January 2017 195.428.730 4.164.225 (21.302.321) 178.290.634 724.896 179.015.530

Net profit for the year – – 7.546.556 7.546.556 54.093 7.600.649Total comprehensive income for the year – – 7.546.556 7.546.556 54.093 7.600.649

Contributions to share capital 15 38.086.891 – – 38.086.891 – 38.086.891Other operations with the Participant 16 – – (58.470.281) (58.470.281) – (58.470.281)On the 31st of December 2017 233.515.621 4.164.225 (72.226.046) 165.453.800 778.989 166.232.789

Net profit for the year – – 10.865.458 10.865.458 (22.926) 10.842.532Total comprehensive income for the year – – 10.865.458 10.865.458 (22.926) 10.842.532

Contributions to share capital 15 27.177.927 – – 27.177.927 – 27.177.927Other operations with the Participant 16, 17 – 479.196 4.149.866 4.629.062 – 4.629.062Acquisition of subsidiaries 4 – (820.073) (2.308.042) (3.128.115) 56.358.563 53.230.448

On the 31st of December 201726

0.693.548 3.823.348(5

9.518.764)20

4.998.132 57.114.62626

2.112.758

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Acting finance director Aimbayeva A.KHead accountant Takezhanova B.K

Stamp: LLP “United chemical company

6. ANNEXES TO ANNUAL REPORT

6.1 GLOSSARY AND LIST OF ABBREVIATIONSSingle member / Fund Joint-Stock Company “National welfare Fund “Samruk-Kazyna” UCC, Partnership, Company

Limited liability partnership " United chemical company»

RK Republic of KazakhstanSDO, UCC companies group, UCC group

Дочерние и зависимые организации ОХК – юридические лица, пакеты акций/долей участия которого принадлежат ОХК на праве собственности или доверительного управленияUCC Subsidiaries and affiliated organizations -legal entities, whose shareholdings / interests belong to UCC on the right of ownership or trust management

DB/SB Board of Directors/Supervisory BoardGSM/GPM General shareholders meeting/ General participants meeting LLP «JV SAP Kazatomprom

Limited liability partnership " Joint Venture Sulfuric Acid plant Kazatomprom»

LLP «KPI Inc.» Limited liability partnership " Kazakhstan Petrochemical Industries Inc."("Kazakhstan Petrochemical Industries Inc.»)

LLP «KLPE» The limited liability partnership "KLPE (Kaspii)»JS «УК SEZ Chemical Park Taraz»

Joint-stock company " SEZ Chemical Park Taraz»

LLP «KUS» Limited liability partnership " Karabatan Utility Solutions»SEZ «NIPT» Special economic zone "national industrial petrochemical Technopark"

(Atyrau region)SEZ "Taraz chemical Park»

Special economic zone "chemical Park Taraz" (Zhambyl region)

ACP Agricultural commodity producerTES Technical economic studySEZ Special economic zonePED Project and estimate documentationPSW Project and survey worksПДВ Permissible emissionCIW Construction and installation worksWCN Work commencement Notice P PolyethyleneHDP High density polyethyleneLLDP Linear low density polyethylenePP PolypropyleneEPC-contract Contract form, including design, supply and construction services (from

English.Engineering, Procurement and Construction)EPCM-contract The project management system in General, including the organization of

engineering surveys, design, supply and construction management (from English. .Engineering, Procurement, Construction, Management)

C-construction The contractor for construction works (from the English.Construction)PMC-contract The contract for the project management (from the English. Project

management Contract), provides the participation of the contractor as a project Manager or Manager, leaving the search function to the customer, based on the bidding of contractors and the conclusion of

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contracts with themICS Internal control system

6.2 TABLE OF STANDARD REPORTING ITEMS GRIItems GRI

Element (indicator) The disclosure of the item. Comments and / or links to other sources

GENERAL STANDARD ELEMENTS REPORTINGStrategy and analysis

G4-1 Application of the Head Manager Chairman of the Board speachCompany’s profile

G4-3 Organization name The section "About company»G4-4 Main products and services Section " group Structure»G4-5 Official location Section " Contact information»G4-6 Number of countries (cities) in which the

organization operatesSections "group Structure" and " Results of activities in priority areas of development»

G4-7 Nature of ownership and legal form The section "About company»G4-8 Markets in which the organization operates Sections "group Structure" and " Results

of activities in priority areas of development»

G4-9 Scale of the reporting organization Sections of "UCC in numbers" and "Social responsibility»

G4-10 Total number of employees Section " Social responsibility»G4-11 Percentage of all employees under collective

ccontractsInapplicable. No collective agreements

G4-12 products supply chain and services of the organization

Section "Economic aspects of activity" (Aspect " procurement Practices»)

G4-13 Significant changes in the size, structure or ownership of an organization or its supply chain

The section "About company»

Commitments to participate in external initiativesG4-14 Does the precautionary principle apply in the

company, and howSections "Risk Management" and "Social responsibility" (Aspect " mechanisms for filing complaints about the practice of labor relations»)

G4-15 External economic, environmental and social charters, principles or other initiatives to which the organization has acceded or which it supports

Sections "Social responsibility" and " Environmental responsibility»

G4-16 Membership in associations (e.g., industry associations) and / or national and international interest protection organizations

The section "About company»

Identified material aspects and boundariesG4-17 List of legal entities whose statements have

been included in the consolidated financial statements or similar documents

The section "About the report»List of legal entities whose statements have been included in the consolidated financial statements:- JSC "MC SEZ Taraz chemical Park"; - JSC "SAPC»; LLP "KHIM-plus»; - LLP" Polymer Production»; - LLP "KUS»;- LLP "KLPE»;- LLP "KPI Inc.»;- LLP " Butadiene»;

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- LLP" PVH Development»;- JSC "MC SEZ "NIPT" accounted for equity

G4-18 Methods of determining the content of the report and the boundaries of the aspects.

The section "About the report»

G4-19 The reporting preparation principles of content determination of the report , that used by the organozations

The section "About the report»

G4-20 List of all material aspects identified in the process of determining the content of the report

The section "About the report»

G4-21 Description of the aspect boundary for each material aspect within the organization

The section "About the report»

G4-22 Report of consequences of all indicators reformulations, published in previous reports ,and the reasons for such reformulation

This report, which contain the section on sustainable development, is the second for the company. There is no any indicators reformulations in it

G4-23 Significant changes in the scope and boundaries of aspects compared to previous reporting periods

There are no significant changes in the scope and boundaries of the aspects compared to the previous report

Stakeholder engagementG4-24 List of stakeholder groups ,which interact with

organizationThe section "Interaction with stakeholders»

G4-25 Description of the principles of identification and selection of stakeholders for further interaction with them

Section " interaction with stakeholders»

G4-26 Approaches to stakeholder engagement Sections " interaction with stakeholders» G4-27 Key topics and interests raised or identified in

the stakeholder engagement process, and how the organization responded to these topics and interests

Section " interaction with stakeholders»

General information about the reportG4-28 Reporting period (e.g. financial/calendar year)

for which information is provided2017 calendar year

G4-29 Date of publication of the previous sustainable development report (if any))

The annual report of the UCC for 2016, which was published on July 5, 2017

G4-30 Reporting cycle (annual, biennial, etc.)) AnnualG4-31 Contact person who can be contacted with

questions about the report or its contentsSection " Contact information»

The GRI content indexG4-32 Specify the option to prepare the report "in

accordance" with the GRI manual.The GRI content index for the chosen option of the report preparation.Reference to the conclusion of external certification of the report (in case of external certification)

The section "About the report»Independent assurance is not provided

CertificationG4-33 Policy and current practice with regard to

seeking external assurance of the reportНезависимого заверения не предусмотрено

Stakeholder engagementG4-34 Corporate management structure of the

organizationSection "structure and management bodies of the UCC" (including subsection " Committees Under the management of the UCC»)

Ethics and integrityG4-56 Description of the values, principles, standards Section " corporate ethics of the UCC»

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and norms of conduct of the organizationTHE CATEGORY "ECONOMIC»

Aspect " Economic performance»G4-EC1 Created and distributed direct economic value

(SDDE)) Section " Economic performance»

G4-EC4 Financial assistance received from the state Section " Economic performance»The aspect "Procurement Practices»

G4-EC9 The proportion of spending on local suppliers at significant locations of implementation activities

Section " Economic performance»

THE CATEGORY OF "ENVIRONMENTAL»The Aspect "Materials»

G4-EN1 Materials consumed by weight or volume Section " Environmental responsibility»G4-EN2 Part of materials representing recycled or

reused wasteSection " Environmental responsibility»

The Aspect "Emissions»G4-EN21 Emissions of NOx, SOx and other significant

pollutants into the atmosphereSection " Environmental responsibility»

Aspect Effluents and waste»G4-EN22 Total volume of discharges indicating the

quality of wastewater and the receiving facilitySection " Environmental responsibility»

Аспект «Соответствие требованиям»G4-EN29 Cash value of significant fines and total

number of non-financial sanctions imposed for non-compliance with environmental legislation and regulatory requirements

Section " Environmental responsibility»

The aspect "procedures of filing complaints on environmental problems»G4-EN34 The number of complaints about environmental

impacts filed, processed and resolved through formal mechanisms for their submission

Section " Environmental responsibility»

THE CATEGORY "SOCIAL»THE SUB-CATEGORY "LABOR RELATIONS PRACTICE AND DECENT WORK»

The Aspect "Employment»G4-LA1 Total number and percentage of new hires and

turnover by age group, sex and regionSection " Environmental responsibility»

G4-LA2 The benefits provided to the employees working on conditions of full employment

Section " Environmental responsibility»

G4-LA3 Percentage of employees who returned after maternity leave/paternity at work, and also part of the employees who stay in the company after the end of maternity leave/paternity, gender

Section " Environmental responsibility»

Aspect " Health and safety in the workplace»G4-LA7 Workers with high injury and high risk of

illness connected with their occupationSection " Environmental responsibility»

Training and education aspectG4-LA9 Average annual number of training hours per

employee by gender and categories of employees

Section " Social responsibility»

G4-LA11 Percentage of employees receiving regular performance and career development reviews by gender and employee category

Section " Social responsibility»

Aspect " mechanisms of complaints against the practice of labor relations»G4-LA16 Number of complaints about the practice of

labor relationsSection " Social responsibility»

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SUBCATEGORY "HUMAN RIGHTS»Aspect " mechanisms for filing complaints of human rights violations»

G4-HR12 Number of complaints about the impact on human rights

Section " Social responsibility»

SUBCATEGORY "SOCIETY»Anti-corruption aspect»

G4-SO4 Information and training on anti-corruption policies and methods

Section " Corporate governance "(subsection " Anti-corruption and bribery»)

G4-SO5 Confirmed cases of corruption and actions taken

No such cases occurred during the reporting period

Compliance aspectG4-SO8 Cash amount of significant fines and total

number of non-financial sanctions imposed for non-compliance with laws and regulations

Section " Environmental responsibility»

SUBCATEGORY "RESPONSIBILITY FOR PRODUCTS»The aspect "privacy of consumer»

G4-PR8 Total number of well-founded complaints regarding to violations of consumers ' privacy

Section "Social responsibility" (Aspect " Mechanisms of labor practices»)

Аспект «Соответствие требованиям»G4-PR9 Cash value of significant fines for non-

compliance with laws and regulations relating to the provision and use of products and services

Section " Environmental responsibility»

7.CONTACT INFORMATION

REPUBLIC OF KAZAKHSTAN010000, ASTANA CITY D. KUNAYEVA STR, 8, BLOCK «B»WEB SITE: www.ucc.com.kz E MAIL: info@ucc.com.kz CORPORATE DEVELOPMENTDEPARTMENT LEADING MANAGER– SEYTBATTALOVA М.B.CONTACT TELEPHONE: +7 (7172) 73-71-89E MAIL: seitbattalova@ucc.com.kz

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