GLOBAL LEADING GREEN ENERGY AND CHEMICAL

COMPANY ANNUAL REPORT 2014

Consolidated Financial Information OCI profile Key figures OCI maintains all financial records in KRW. USD figures are estimated and presented as a convenience to the reader.

2012 2013 2014 OCI is a global producer of value-added chemicals and materials for Economic performance USD KRW USD KRW USD KRW a broad range of industries. Since our founding in 1959, we have Sales 2,856 3,218 2,699 2,956 2,981 3,140 leveraged our technical expertise, process know-how, and highly Operating income 137 155 (97) (106) 44 46 efficient manufacturing capabilities to develop a diversified portfolio Net income 11 13 (263) (288) 40 42 of world-class products and solutions. We are now meeting the EBITDA 618 699 385 422 542 571 needs of customers in numerous countries around the globe with Capital expenditures 661 744 382 419 663 698 In USD mn and KRW bn. USD figures are based on the average 2014 KRW-USD exchange rate of 1,053.22. a portfolio that spans the fields of basic chemicals, petrochemicals, carbon materials, renewable energy, and advanced materials. USD KRW USD KRW USD KRW Looking ahead, we continue to strategically invest in tomorrow’s Total assets 6,800 7,283 6,919 7,302 6,749 7,419 technologies to make the future a better place as we fulfill our vision Total liabilities 3,447 3,691 3,818 4,029 3,787 4,163 of being a global leading green energy and chemical company. Total shareholder’s equity 3,353 3,592 3,101 3,273 2,962 3,256 In USD mn and KRW bn. USD figures are based on the KRW-USD exchange rate of 1,099.20 as of Dec. 31, 2014.

ROA 0.2% (3.9%) 0.6% ROE 0.3% (8.3%) 1.3% Net debt-to-equity ratio 39.5% 61.8% 66.6% Leverage ratio 103% 123% 128%

Great place to work Accident frequency rate 0.25 0.40 0.69 Accident severity rate 0.06 0.03 0.03

Environmental commitment

CO2 emissions (in tons) 2,630,916 2,571,185 2,718,437 Key milestones Waste recycling 63.6% 75.6% 68.4% Water consumption (in tons) 11,993,064 11,178,659 11,412,786 1959 - 1960s 1970s - 1980s 1990s - 2000s 2010s

·  Oriental Chemical · Hydrogen peroxide business · Natural soda ash business · Solar energy business Industries founded (1959) · Petrochemical and coal · Specialty gases business · Cogeneration business · Soda ash business chemical businesses · Polysilicon business · OCI Resources NYSE listing (2013) Social responsibility · Caustic soda business · Korea Exchange listing (1976) · Corporate name change to OCI (2009) · DJSI Asia/Pacific index Total donations (in KRW bn) 2.6 2.4 1.2 · Calcium chloride business component (2010~2014) Total volunteer hours 5,654 4,665 5,153 Contents

Introduction Management Review Business Review Management & Operations Financial Review 04 About us 06 CEO’s review 34 Basic chemical 42 Governance 48 Financial statements 05 Foundations 08 Economic review 36 Petrochemical and Carbon materials 44 Global network 10 Strategy focus 38 IPP business 46 Product list 12 2014 in brief - Solar energy 16 2014 focus: US Alamo solar PV project - Cogeneration plant 20 2014 focus: China carbon chemicals projects 40 Research & Development 24 2014 focus: Five dollar cost reduction project 26 Great place to work 30 Environmental commitment 32 Social responsibility

This annual report provides an overview of our economic, environmental, and social performance in 2014. For the latest OCI information or to download a copy of this report, please visit www.oci.co.kr. About us Foundations

Our businesses Company vision 2014 Performance

Basic chemical Petrochemical and IPP & others ‘Global Leading Green Energy and Chemical Company’ Sales Carbon materials

In KRW bn ●●● 3,140 Our future Constantly innovate to produce 63% 34% 3% green energy and chemical EBITDA products with the highest level of satisfaction for our employees, In KRW bn customers, shareholders, and stakeholders. 571 Vision

●● Operating income ● Our Seize the CHANCE with thorough Our way values In KRW bn Achieve core technology preparation and with the spirit to leadership through innovation, CHALLENGE for continuous 46 operational excellence, and CHANGE for a greater future. resource optimization based on Sales breakdown by business an open and diversity-respectful CO2 emissions corporate culture.

Products Products Products & Services 5.7% Polysilicon Carbon black Solar energy Soda ash Pitch Cogeneration plant Nitrogen trifluoride Toluene di-isocyanate (TDI) Water consumption Monosilane Benzene, Toluene, Xylene (BTX) ● ●● ●●● Hydrogen peroxide Plasticizer Our way Our values Our strategy Sodium percarbonate Sapphire materials 2.1% Calcium chloride ENERVAC vacuum insulation panels Innovation Chance Sustainable growth Competency to explore future growth by The future is for those who find and seize the Develop through systematic organizational attempting and suggesting new business chance. We should take the chance when we are management and activities in the areas of Waste recycling Operating sites Operating sites Operating sites opportunities through creative methods and prepared to embrace future opportunities by environment, safety, and health. Korea, China, USA, Malaysia, Korea, China, Vietnam Korea, China, USA expanding core businesses. swiftly responding to changing market, customer, Philippines and business circumstances. Focus on core businesses 7.2 pp Operational excellence Turn existing competitive technological capabilities *pp : percentage point Competency to continuously accumulate Challenge and new technologies into key businesses and knowledge on production and technology and A greater future is achieved when we are brave promote them into growth businesses. Sites Employees improve operational efficiency and productivity. enough to face a challenge with progressive and Global operations 33 5,655 entrepreneurial minds and spirits to overcome Talent development Core technical leadership difficulties. Nurture all employees into globally competitive Competency to develop core technologies to talents. Korea Asia USA produce differentiated and high value-added Change products which respond to the needs of our Innovation through change is essential for growth. Customer-focused 14 3,974 8 367 11 1,314 customers. We embrace continuous change to reach the same Satisfy and impress customers through insightful goal and attain success together. understanding of their needs, adoption of a Resource optimization customer-first approach, and prompt response to Competency to generate optimum quantitative their requests. and qualitative services, technologies, and products by actively utilizing all resources Social contribution available. Fulfill the role as a corporate citizen trusted by other members of society Openness in corporate culture to enrich their lives. Competency to create a culture with openness, diversity, and mutual respect whereby we will maximize our capabilities.

4 Introduction OCI Annual Report 2014 5 dollar in the second and third reduce overall manufacturing What efforts is OCI making What are your key CEO’s review quarters combined with falling costs by USD 2/kg, giving in the social, environmental, strategies going forward? oil prices starting in the third us an additional cost edge and safety areas? quarter took a major toll on in this competitive market. When we make investments, the operating profitability of Transparency and integrity we will do so in a way that our carbon materials business. We will continue to actively have been the foundation of enables us to maintain a pursue development our business philosophy from sound financial footing. We While the global polysilicon opportunities in the global the very beginning. Over the will also pursue new business market enjoyed stability solar power market, an area years, we have continued opportunities through active, and a relative price recovery where China, the US, and India to make the world a better win-win collaboration with in 2014, emerging market are expected to lead growth. place through our donations our partners. Although market leader China fell short of Among these, we will be of solar PV systems in both conditions may be challenging, growth expectations. More focusing on China, a market Korea and Nepal as well as our goal is to help foster a generally, oversupply in the that is steadily diversifying chemical market continued beyond utility scale projects to to push prices downward, small-scale residential projects. “We will consistently deliver products reaffirming the necessity of new application and We are now executing a two- that satisfy our customers with technology development. track strategy to counter superior quality at competitive the unfavorable impact of WooHyun Lee Instability in currency markets low global oil prices on our prices as we respond proactively President and CEO led by the weak Japanese yen, coal chemical businesses. As to market uncertainty.” euro, and US dollar continued we continue to pursue new OCI Company to push the Korean won higher. market opportunities and This became an increasingly diversify feedstock sources in a wide range of activities market where supply and disadvantageous factor given China, we are also focusing serving local communities. demand are balanced by selling that more than 60% of our sales R&D investment on our coal These and other efforts won products at reasonable prices are from overseas markets. chemical plants in Korea to us a place on the Dow Jones and optimizing production However, beginning with the shift production to high- Sustainability Asia/Pacific levels based on accurate dramatic USD 5/kg reduction value-added products. Index for a fifth consecutive demand forecasting. in polysilicon manufacturing year in 2014. We will continue cost we achieved, we see to make every effort to be We also aim to make the most OCI Company President and CEO in Shandong Province, enabling in the US solar market with competitiveness improving as What can we expect from a respected member of the of our assets by selling non- us to actively pursue new the opening of new plants to we flexibly adapt to market OCI’s new businesses in the communities we operate in. core and idle business assets WooHyun Lee shares his thoughts on customers in this market that produce high-efficiency N-type uncertainty. We believe these coming year and beyond? when appropriate to strengthen 2014 and insights on 2015 and beyond. has huge growth potential. solar modules and dual-axis cost innovation efforts will As a green energy and core businesses. In 2014, we When the coal tar distillation trackers to maximize harvesting also spread to our other Assuming our Alamo solar chemical company, our first divested our stake in subsidiary plant is completed in 2016, efficiency throughout the day. core businesses, improving project in the US and and foremost priority is OCI-SNF to our partner. We the aggregated capacity We also continued efforts profitability going forward. Saemangeum cogeneration safety and environmentally also successfully sold stakes of our plants in Korea and to streamline our business project in Korea are completed friendly operations. Following in plants 2, 3, and 4 of the How did OCI perform in 2014? demand in that market. China will reach 1.18 million portfolio by selling off non- on schedule in 2016, these a new safety management Alamo solar project in the US. metric tons, making us the core businesses and assets What is your outlook for OCI’s projects will begin improving roadmap, our training, crisis Together, these sales have In 2014, we returned to In addition to the independent global No. 3 producer. as we focused on enhancing core businesses in 2015? the bottom line starting next management simulations, and improved our financial position operating profit and laid the power production business long-term financial soundness. year. We are committed to other efforts have enabled and given us the liquidity foundation for growth going we launched last year, we Our 400 MW Alamo solar The global solar industry is making independent power us to raise our International needed for future investments. forward. A 10% increase in continued to accelerate efforts project in the US also projected to install 53 GW of production a key growth Safety Rating System (ISRS) polysilicon prices combined to develop businesses that will continued to make steady What were the primary capacity in 2015, up 21% from field in the coming years. rating by two levels over the Looking forward, we will with a solid customer base drive future growth. Toward progress. Since March 2013, we challenges OCI faced in 2014? the 44 GW added last year. past two years. Our goal over continue to consistently and active marketing helped that end, we have stepped up have completed four solar PV The completion of the P3.9 Our energy storage system the next two years is to put deliver products that satisfy boost sales. Solid sales of our carbon materials business plants with a total capacity of Although we achieved a polysilicon debottlenecking (ESS) business currently has in place a world-class safety customers with superior products such as NF3 and in China while ensuring these over 100 MW. In conjunction remarkable recovery from 2013, project in the first quarter systems in testing and is rapidly system and culture. We will quality at competitive prices soda ash by our subsidiaries investments do not negatively with the project, we continued the steady appreciation of the of the year will give us the nearing the commercialization also be striving to reduce as we respond proactively to also helped improve overall impact financial soundness. We to bolster competitiveness Korean won against the US ability to actively respond stage. Demand for electric greenhouse gas emissions market uncertainty and strive results. I am particularly have joined forces with major to this growth opportunity. vehicles and power generation as we continue to improve to be a global leader in each proud of the dramatic cost local partners and broken When completed, the project systems is expected to continue how we recover and reuse of our business fields. reductions we were able ground for a 350,000 metric “We continued efforts to streamline will increase nameplate to grow, and we are moving energy, material, and water to make in the polysilicon ton coal tar distillation plant in capacity by 10,000 metric rapidly to take advantage resources to help protect the field as we proactively Anhui Province and an 80,000 our business portfolio from tons to 52,000 metric tons. of emerging opportunities environment and pave the prepared for recovering metric ton carbon black plant a long-term, big-picture view.” It will also simultaneously in the ESS market. way for sustainable growth.

6 Management Review OCI Annual Report 2014 7 Economic review All figures are K-IFRS consolidated basis unless noted.

2014 operating results particularly for specialty gases. due to the bankruptcy of a match the maturity profiles of and cross currency swap Stock information 2015 outlook debottlenecking project in early Petrochemical and carbon polysilicon customer. Overall, financial assets and liabilities. contracts to manage a portion 2015, which will set the stage The business environment materials sales declined as this performance enabled of foreign currency risk from As of December 30, 2014, As we head into a new year, for us to simultaneously boost in 2014 was challenging due average selling prices dropped ROA and ROE to reach 0.6% • Interest rate risk receivables and payables. 30.13% of OCI common stock we are facing a variety of sales revenue and reduce costs. to fast-changing market along with falling oil prices. and 1.3% respectively at the management In addition, we enter into was owned by the Company uncertainties in the global environments and plunging oil end of 2014 from -3.9% and foreign currency forwards founders, 19.08% by foreign economy, foremost of which We expect to see challenging prices. Nevertheless, we were -8.3% in 2013. The net debt- We use an appropriate mix of in order to manage certain investors, and 50.79% is falling oil prices. We are conditions in the petrochemical able to minimize the effects Financial information to-equity ratio at year-end fixed- and floating-rate loans foreign currency risks related by domestic institutional taking steps to deal with these and carbon materials markets of these challenges to achieve was 67%, a 5-point increase, to flexibly respond to interest to future expected sales and investors and individuals. uncertain market conditions due to continued low oil sales revenue of KRW 3,140 Major financial indicators while the leverage ratio was rate fluctuations. In addition, purchases in foreign currencies. and are well aware of the prices. We will focus on taking billion, a 6% increase from 2013. 128%, a 5-point increase. we partially hedge floating Dividend business volatilities that must our market leadership to We recorded an operating EBITDA increased by 35% rate financial assets and Capital expenditures be surmounted. We intend to the next level as we pursue profit of KRW 46 billion in 2014 primarily due to the Funding strategy liabilities to ensure interest rate OCI paid a cash dividend put OCI back onto a growth cost reduction at all levels compared to an operating loss recovery of the polysilicon, exposure is properly managed. Total capital expenditures of KRW 200 per share of track by focusing on the to counteract downward of KRW 106 billion in 2013. specialty gas, and soda • Liquidity risk management increased to KRW 698 billion common stock in 2014. The basics as we reinforce the pressure on selling prices. EBITDA was KRW 571 billion, ash businesses, more than • Foreign exchange in 2014 compared to KRW 419 total dividend was KRW 4,770 competitiveness of existing up 35% from the previous year offsetting reduced margins We have historically been risk management billion in 2013. We strategically million, which represents businesses and build growth mainly due to reduced losses in the petrochemical and able to satisfy our cash focused capex spending on 21.52% of net income (K-IFRS momentum in new ones. from our polysilicon business. carbon material businesses requirements from cash We are exposed to currency power generation projects parent basis) and a dividend as the average market price flows from operations and risk on sales, purchases, during the year, including the yield of 0.25% based on the In the global solar PV market, Despite the continuing supply of most chemical products debt and equity financing. and borrowings that are Alamo solar project in the US December 31 closing share we expect demand to rise from and demand imbalance in declined throughout the We have established short- denominated in a currency and the OCI SE cogeneration price of KRW 75,600. 44 GW in 2014 to 53 GW in the solar PV industry, basic year. Profitability was further term and long-term fund other than our functional power plant in Korea. 2015 and value-chain supply chemical sales rose for the impacted by a KRW 57 billion management plans and currency, the Korean won and demand to approach year, boosted by an improving accounts receivable write-off reviews. We monitor actual (KRW). We enter into forward balance. Accordingly, we will business environment, in the third quarter of the year cash outflows and budget to foreign exchange contracts complete the P3.9 polysilicon

Financial results by segment Sales revenue Interest expense Stock information

In KRW bn In KRW bn In KRW bn

3,140 2013 2014 2013 2014 2,955 Interest expense 87.5 96.2 Common shares outstanding 23,849,371 23,849,371 Basic Petrochemical & Others Total Inter-company Grand chemical carbon materials adjustment total Interest rate 3.83% 3.77% Foreign investor holdings 24.23% 19.08% Sales revenue 2,107 1,166 84 3,357 (217) 3,140 Operating income 37 59 (52) 44 2 46

EBITDA 490 102 (23) 569 2 571 2013 2014 Dividend OCI share price K-IFRS parent basis In KRW

2013 2014 250,000 ROA ROE Net debt-to-equity ratio Leverage ratio EBITDA Net income (in KRW mn) (305,346) 22,168 200,000 In KRW bn EPS (in KRW) (12,803) 929 0.6% 1.3% 128% 571 150,000 123% Dividend per share (in KRW) - 200 66.6% 422 61.8% 100,000 -3.9% Total dividends (in KRW mn) - 4,770 -8.3% Dividend payout ratio - 21.52% 50,000

2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 Dividend yield - 0.25% 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec *Based on the closing share price of each month.

8 Management Review OCI Annual Report 2014 9 Strategy focus

Our focus on the basics is returning us to growth and profitability as we build a sustainable future as a global leading green energy and chemical company.

3 FCR has already achieved its 4 of the sale will help us retire Optimizing operational scale target through savings in fixed Continually strengthening debt and finance the remaining 1 2 costs and operational tuning. our financial position three plants in the seven-plant Investment Active alliances with project. rationalization our partners We continuously seek the Our polysilicon cost-reduction best operating scenario roadmap for the next four years We will make every effort to We also made the decision OCI based on demand and market aims to reduce manufacturing improve financial soundness, to sell our 50% stake in OCI- conditions, the seasonal impact costs by 39% from their which has been adversely SNF, a producer of wastewater business on manufacturing costs, and current level, excluding the affected by the difficult treatment chemicals, to the strategy working capital minimization. effect of currency fluctuations. operating environment during joint-venture partner. Although 3 4 In addition to continuing to the past few years. that company has long been Optimizing Continually strengthening Innovative production improve on the same areas that profitable and generated a operational scale our financial position technologies give us a very FCR targets, we believe we Beyond the challenging market steady cash flow, in the course competitive manufacturing can attain a high-single-digit environment, the biggest stress of our ongoing business review, cost structure in all of our core reduction in utility costs thanks on our financial health over we reached the divestment businesses. We have reduced to optimizations that will the past few years has been decision due to the non- polysilicon manufacturing significantly reduce electricity the cost of financing the 400 core nature of that business costs by 23% since 2010, even consumption, the largest MW Alamo solar PV project and limited opportunities for taking into account unfavorable component of variable costs. in the US. In 2014, we took a synergy with other businesses. foreign exchange trends. major step toward returning We believe this opportunity to The largest portion of this to a sound financial footing refocus on our core businesses 1.1 Following the completion 2 During the year, we signed savings—19%—has come from by selling an 80% equity stake will be a net plus for us going Investment rationalization of the 10,000 metric ton P3 Active alliances an agreement with Maanshan the FCR initiative. An acronym in the Alamo 4 solar plant on forward. polysilicon plant in 2010, we with our partners Iron & Steel Company to build for "five-dollar cost reduction", favorable terms. The proceeds boosted nameplate capacity a 350,000 metric ton coal We focus on new growth to 42,000 metric tons tar distillation plant in Anhui engines such as solar PV energy through two debottlenecking We actively seek opportunities Province. Our joint venture while strengthening existing projects in 2011 at roughly for strategic alliances and with Zaokuang Group broke businesses. one-half the per-kg cost. partnerships to create a better ground for the 80,000 metric With the polysilicon market ton first phase of a 120,000 and more competitive business Polysilicon capacity expansion overview While cost reduction is an showing signs of recovery in platform. metric ton carbon black plant ongoing priority in all OCI 2014, we launched the P3.9 in Shandong Province. We also Capacity Capex Phase Completion businesses, we have been debottlenecking project to In recent years, we have completed a 30,000 metric (MT/year) USD mn USD / kg particularly successful in the add 10,000 metric tons of established a growing ton expansion at the Shandong Gen 1 P1 Q1 2008 6,500 545 84 polysilicon field. The price capacity in 2015 at roughly production network in China OCI coal tar distillation plant, P2 Q3 2009 10,500 895 85 of solar-grade polysilicon one-seventh the per-kg cost, through joint ventures with laying the groundwork for us to Gen 2 P3 Q4 2010 10,000 761 76 continued to hover in the USD further enhancing our market local partners. We were expand our customer base in P3.5 Q3 2011 8,000 320 40 20/kg range in 2014. competitiveness. particularly active in the carbon this important market. materials field in 2014 with Debottlenecking P3.7 Q4 2011 7,000 245 35 three major developments. P3.9 Q1 2015 10,000 110 11

10 Management Review OCI Annual Report 2014 11 2014 in brief

OCI completes 2.8 MW Sun Action Trackers OCI Materials initiates Ma Steel-OCI Chemical

Gangbuk solar PV plant completes 200 MW dual- NF3 plant expansion breaks ground for coal tar in Namyangju axis tracker plant in Texas project in Korea distillation plant in China

We completed our second This new US-based subsidiary This subsidiary moved This joint-venture with Maanshan solar PV plant in the Seoul began producing dual-axis forward with plans to increase Iron & Steel Company broke

region in as many years in trackers in San Antonio to NF3 capacity by 1,000 metric ground for a 350,000 metric ton 2014. Located on the premises supply the ongoing 400 MW tons based on improving coal tar distillation plant in China’s of the Gangbuk-Arisu Water Alamo project. The trackers market fundamentals. When Anhui Province. Established in Purification Center east of Seoul continuously reposition solar completed in the second September, the 60:40 joint venture in Namyangju, the plant will modules to track the sun half of 2015, the project is scheduled to begin commercial generate an estimated 3 GWh throughout the day to help will increase OCI Material’s production in early 2016, boosting of power annually, enough to solar plants achieve maximum industry-leading capacity to our China coal tar production meet the needs of 850 families. efficiency year-round. 6,600 metric tons. capacity to 730,000 metric tons.

February June September September October October October December

OCI launches Mission Solar Energy Shandong OCI- OCI renamed to DJSI P3.9 polysilicon completes 100 MW module Jianyang Carbon Asia/Pacific Index debottlenecking project plant in Texas Black breaks ground for 5th year in Korea for plant in China This new US-based subsidiary We were named a component We began work on the began producing high- This 51:49 joint venture of the Dow Jones Sustainability previously announced P3.9 performance N-type solar modules with Zaokuang Group Asia/Pacific Index for the fifth debottlenecking project in in San Antonio to serve the broke ground for an consecutive year, one of 40 Gunsan, Korea to increase ongoing 400 MW Alamo project. 80,000 metric ton carbon Korean firms to be included in polysilicon production capacity The plant is the first in the US to black plant in the city the 2014/2015 index. Consisting by 10,000 metric tons. When produce modules with N-type solar of Zaozhuang in China’s of the top 20% in terms of completed in March 2015, the cells. This new type of cell achieves Shandong Province. When sustainability of the 600 largest project will boost our total a conversion efficiency rate that is completed in early 2016, the companies operating in the nameplate capacity to 52,000 approximately 15% higher than the plant will meet the growing Asia-Pacific region, the index metric tons and significantly typical 18% conversion efficiency of needs of the local auto and is an important benchmark for improve cost-competitiveness P-type cells, making the supplied tire industries. global investment, evaluating in the market. modules among the most efficient corporate sustainability in terms in the industry. of economic, environmental, and social performance.

12 Management Review OCI Annual Report 2014 13 Building on our strengths

At OCI, we are building a better, greener future on a foundation of more than five decades of experience in the chemical industry, innovation-driven cost leadership, and a dedication to excellence.

Polysilicon

Gunsan plant, Korea 2014 focus In 2014, we passed the 100 MW milestone in our 400 MW Alamo project in the US as we stayed on track for completion in 2016. US Alamo OCI Company Global Solar Department Head SeungMin Oh and OCI Solar Power President SeogHwan Yoon talk about the project’s solar PV project progress and what lies ahead for OCI’s global energy business.

Alamo project facts Working to bring more clean energy home in Texas 400 MW capacity Alamo 7

Alamo 6 Alamo 3 70,000 homes Alamo 4 Alamo 2 Alamo 5 Alamo 1 San Antonio, Texas In operation 1,670,000 PV panels Under construction

Project timeline

Project MW(AC) 2013 2014 2015 2016 Alamo 1 40.7 Alamo 2 4.4 Alamo 3 5.5 Alamo 4 39.6

Interviewees Alamo 5 95 SeungMin Oh (SMO) Vice President, Alamo 6 110 Global Solar Department, OCI Company Alamo 7 106 SeogHwan Yoon (SHY) President, OCI Solar Power

How did OCI get into the solar PV development business? is creating new opportunities for our partners across the solar PV value chain as it spurs adoption of solar energy, new SMO: Back in the middle of the 2000s, we expanded our vision job creation, and cleaner power for local communities. beyond being a global leading chemical company to being a global leading green energy company. At the time, our focus was on producing ultra-pure polysilicon, the key material in solar How does the global solar market look from your perspective? PV systems. Our move into the solar PV development industry came in January 2011 when we established OCI Solar Power SHY: While the US is currently the main focus of our solar in the United States. Since then, we have been hard at work PV development business, we are actively evaluating and pursuing project development opportunities around the globe. pursuing opportunities worldwide. China, South Africa, and Morocco are among the many global markets we Beyond promoting the adoption of clean solar power, our are looking at that offer good sunshine, low country and goal in the solar PV development business is to grow the development risk, and substantial growth potential. market by working closely with local governments, utilities, In terms of the market situation, we see tough competition and and development partners. This collaborative win-win strategy falling costs across the board. When we entered the solar PV

Alamo 2, Texas, USA OCI Annual Report 2014 17 Can you comment on the financial aspect of this new business? What is your near-term outlook for solar PV projects?

N-type mono cells and modules Solar development projects deliver stable, long-term revenue CO2 reduction Like many new technologies, demand for renewable energy Subsidiary Mission Solar Energy manufactures the first and streams but require significant up-front capital investments. is driven by government policies and incentives. The policy only commercial N-type solar cells and modules in the USA. Low-cost financing is key to moving these projects forward. landscape around the globe continues to change from To date, we have relied exclusively on debt financing to 736,000 tons/yr year to year, adding to the challenges developers face. provide the needed capital for these projects. That changed From a project perspective, we are seeing an unmistakable in 2014 when we sold an 80% equity stake in the 39.6 MW shift from large-scale utility projects to small-scale Alamo 4 project to one of the largest publically-traded distributed systems, particularly rooftop installations. End energy companies in the US. By monetizing our stake on users are becoming generators and selling back to the favorable terms, this business is net-income positive for the utilities. This is leading to challenges for grid operators year and we have secured capital that will help us complete 140,000 less cars on the road as well as opening opportunities in areas such as reactive the final three phases of the Alamo project on schedule. power, energy storage, and grid stability control.

In the US, the Alamo project will keep us busy for the next N-type nut pines planted How is OCI’s solar power business doing outside the US? 17,120,000 couple of years. In the meantime, the experience and contacts N-type solar cell solar module we have made will help us pursue leads for future projects as we While the global solar market is steadily growing, the continue to expand our presence in this stable growth market. Korean solar market continues to lag behind, accounting for only 10% of the national renewable energy market. The Elsewhere, we anticipate an ideal environment for development development business back in 2011, EU markets were driving utility scale market has been sidelined by government in Korea as the government moves toward a unified policy global growth. Today, the momentum has shifted to Asia. policies that favor small producers and local use. We went for both solar and non-solar renewables. In China, we In September, China unveiled a new policy that raised the into 2014 with the goal of completing projects totaling expect demand to be higher as projects that were delayed maximum size of distributed generation systems from 6 MW to 80 MW, but were only able to install 15 MW of capacity, due to policy uncertainty in 2014 move forward. 20 MW. While financing small projects is always a challenge, the bringing total installed capacity to roughly 20 MW. market is there and we are working on creative ideas to tap it. While we don’t have any projects in China at this point, we Currently, our largest development pipeline is in the US. The believe that situation will change in the near future. China is Alamo project now has approximately 100 MW in operation, with installing upwards of 10 GW of capacity annually, with distributed another 300 MW scheduled to come online by the end of 2016. generation projects capturing roughly 20% of the market. In terms of installed capacity, we now have 92 MW in the US and Electricity is relatively expensive there, so solar PV makes sense 19.3 MW in Korea. for companies looking to reduce costs. China has also announced a new policy that favors projects up to 20 MW, a policy that will encourage growth in the distributed generation segment. Can you give us an update on the Alamo project?

The Alamo project in Texas continues to proceed on schedule. Since Alamo 1 began operations in December 2013, we have completed Alamo 2 (4.4 MW) in March and Alamo 4 (39.6 MW) in August. We also broke ground for Alamo 3 (5.5 MW) and Alamo 5 (100 MW). The latter is our largest project to date and the first of three final 100 MW phases we are on track to complete by the end of 2016.

In addition to delivering clean energy to Texans, we are also helping create new jobs. In 2014, we invested in two new partners that began delivering modules and equipment as the Alamo project neared 100 MW in installed capacity. Mission Solar Energy began supply high-efficiency N-type modules, while Sun Action Trackers delivered dual-axis trackers. Together with existing partners Kaco New Energy and Mortenson Construction, the project is on track to create some 800 permanent jobs across the region. Mission Solar Energy, Texas, USA

18 Management Review OCI Annual Report 2014 19 2014 focus Since setting up our first joint-venture coal tar distillation plant in Shandong Province in 2008, we have continued to strategically expand China operations in China by partnering with major local firms. OCI Company Carbon Business Head YooShin Kim and OCI China carbon chemicals President JunFang Si talk about how our latest projects are progressing and what lies ahead for OCI in the world’s largest market. projects

Capacity overview Building a base for growth in the world’s largest market Coal tar distillation 450,000 MT 380,000 MT 350,000 MT 1,180,000 MT Carbon black

270,000 MT 80,000 MT 350,000 MT

Korea China Planned expansion

Interviewees How did OCI’s carbon chemicals businesses perform in 2014? YooShin Kim (YSK) Senior Vice President, Carbon Business Division, OCI Company YSK: Our carbon black, benzene, plasticizer, and pitch JunFang Si (JFS) President, OCI China businesses faced a challenging economic environment characterized by declining demand, continued oversupply, and intense price competition as we grappled with the How did OCI get started in the carbon chemicals business? turmoil from the rapid decline in oil prices in the second- half of the year. Ongoing efforts to maximize plant YSK: OCI’s carbon chemicals business dates back to 1976 when operation, actively reduce costs, and shift production to we opened Korea’s first coal tar distillation plant to process higher-value-added products are key to the high degree the waste by-product from the Pohang coke plant of Korean of competitiveness we have in each of our businesses. steelmaker POSCO into a variety of coal chemical products. The business grew rapidly. We added a pitch plant in 1978, naphthalene and tar acid plants in 1979, and a carbon black Where do you see future growth opportunities coming from? plant in 1981. Since then, we have continued to expand our product portfolio. Today, we have a diversified and vertically YSK: Capacity expansion in the right markets and better integrated lineup of carbon chemicals serving the electric, products are crucial to driving growth in these businesses. electronics, automobile, construction, and textile industries. We continue to strategically increase coal tar distillation and carbon black production capacity in both Korea and China to The technology and expertise we have gained over the past meet the specific needs and requirements of those markets. four decades are now enabling us to move into higher-value- added markets. Those same advantages have enabled us to More specifically, we are pursuing a specialization and expand production beyond Korea in recent years to pursue new diversification strategy that we believe will significantly enhance business opportunities in key overseas markets. Our business in our flexibility to adapt to changing market conditions going China is a case in point. Since 2008, we have partnered with a forward. In general, we see China as our primary production number of local companies to set up joint ventures to produce base for high-volume, general-grade products. Korea will both coal tar and carbon black, key feedstocks for China’s be our hub for technical innovation as well as the primary booming industrial sector. We expect this trend to continue as production base for higher-end products such as safer we work to better serve customers in that growing market. plasticizers, specialty black, and mechanical rubber goods.

Coal tar distillation plant, Shandong, China OCI Annual Report 2014 21 China has been a strategic focus for us since we began Province. In November, we completed an expansion project at to actively exploring opportunities to diversify coal tar sourcing operations at the joint venture Shandong OCI coal tar distillation the joint venture Shandong OCI coal tar distillation plant that to prepare for a potential change in suppliers, we continue The world’s #3 coal tar distiller plant in Shandong Province in 2008. In 2011, we opened OCI raised capacity from 350,000 to 380,000 metric tons. Combined, to improve production processes to enhance our ability to 1,180,000 MT capacity when expansion is completed China in Shanghai to serve as a control tower for local investment these and other upcoming projects position us to expand market flexibly use either oil- or coal-based feedstocks to maximize

and operations. In 2012, subsidiary OCI Materials opened an NF3 share in local downstream industries such as carbon black. cost competitiveness. We will also continue to pursue cost specialty gas plant in Jiangsu Province. In 2013, we opened a reduction at all levels, leveraging the insights gained from our joint venture fumed silica plant in Tangshan. And we are now expanding production operations in both China and Korea. Two track strategy building joint venture carbon black and coal tar distillation What is your business outlook for 2015? plants in Shandong and Anhui Provinces, respectively. From a product perspective, we will increase production High grade products in Korea, normal grades in China YSK: Looking ahead, we expect market conditions to remain and sales of higher-value-added products such as specialty bearish as low oil prices continue to put downward pressure black and mechanical rubber goods. We also expect How did OCI advance its strategy in China in 2014? on selling prices. In this challenging environment, we see raw our innovative custom container transport system to What makes China a strategic focus for OCI? materials sourcing diversification and cost reduction as key boost carbon black sales to Japanese tiremakers. JFS: We moved on several fronts to expand coal tar and carbon tasks as we work to expand sales and profitability. In addition JFS: China is a key market for numerous reasons. It has plentiful black production capacity in China during the year. In September, raw materials and the infrastructure to support industry. we partnered with Maanshan Iron & Steel Company—one of But even more important is its huge growth potential as the China’s major steelmakers—to set up a joint venture 350,000 world’s largest market. Building on our success to date, we will metric ton capacity coal tar distillation plant in Anhui Province. In continue to pursue new opportunities across a broad range October, we broke ground for an 80,000 metric ton carbon black of business fields and regions in this important market. plant with Zaokuang Group in the city of Zaozhuang in Shandong Laying a solid foundation in the carbon chemicals field

OCI entered the carbon chemicals field in 1976 when we opened Tangshan OCI Sunfar Chemical Korea’s first coal tar distillation plant. Today we are a growing global player with an expanding manufacturing base in both Korea and China, meeting the needs of industry with quality. Shandong OCI Jiangsu OCI Materials Gwangyang plant, Korea

Shandong OCI-Jianyang Carbon Black OCI China

Business Milestones At OCI, we have built our businesses by anticipating needs in the marketplace and seizing the opportunities. Our carbon chemicals 1976 Coal tar distillation and BTX plants in Pohang, Korea business is a case in point. Built to handle the waste by-product from 1978 Pitch plant in Pohang, Korea the coke plant at Korea’s first integrated steelworks in Pohang, our first Shandong OCI, China Existing plants 1979 Naphthalene and tar acid plants in Pohang, Korea coal tar distillation plant was also Korea’s first facility of its kind when Ma Steel-OCI Chemical Under construction 1981 Carbon black plant in Pohang, Korea completed in 1976. As we set our sights on expanding this new business 1983 Phthalic anhydride plant in Pohang, Korea into value-added areas, we signed a series of technical agreements 1987 Coal tar distillation and BTX plants in Gwangyang, Korea with major international chemical companies as we began building a 1992 Carbon black plant in Gwangyang, Korea comprehensive manufacturing base for coal chemicals. By the early 1980s, Operations in China Plasticizer plant in Pohang, Korea we had expanded our product portfolio to include pitch, naphthalene, tar 1996 Carbon black plant in Gwangyang, Korea acid, and carbon black as well as completed multiple plant expansions Company Current capacity (MT) Major products and services Period of operation 2008 Coal tar distillation plant in Shandong, China to keep up with demand. This business continued to grow and mature OCI China N/A - Polysilicon and chemicals sales 2012 to present 2014 Coal tar distillation plant groundbreaking in Anhui, China over the next two decades. Then, in the latter part of the 2000s, it took - Business development Carbon black plant groundbreaking in Shandong, China on an international dimension as we partnered with Shandong Haihua Shandong OCI 380,000 Coal tar distillation 2008 to present Coal Chemical to commission our first overseas coal tar distillation Ma Steel-OCI Chemical 350,000 Coal tar distillation Will be completed in 2016 plant in China in 2008. We are currently in the process of ramping up manufacturing in China with new joint-venture coal tar and carbon black Shandong OCI-Jianyang Carbon Black 80,000 Carbon black Will be completed in 2016 plants now under construction that will make us a growing player in that Jiangsu OCI Materials 1,000 Nitrogen trifluoride (NF3) 2012 to present huge and growing market. Tangshan OCI Sunfar Chemical 6,000 Fumed silica 2013 to present

22 Management Review OCI Annual Report 2014 23 2014 focus Few industries in recent history have seen prices fall as rapidly as the polysilicon industry. OCI Company Gunsan Plant Head Kwan Heo Five dollar cost talks about how the FCR project has significantly enhanced cost leadership in the polysilicon market. reduction project Another factor in our success was improvements in monthly forecasting. We were able to precisely and efficiently Interviewee coordinate the plant-wide effort based on continuous Kwan Heo Head of Gunsan Plant, OCI Company team feedback on their cost-reduction effort progress.

Second, this was a comprehensive team effort. The Gunsan plant Where did the “FCR” project name come has more than 30 teams. Those teams came up with more than Pushing the limits of technology from and what were your results? 100 cost reduction ideas to help us achieve this result. The ideas and creativity to deliver top quality came from every area of the workplace, ultimately enabling FCR is an acronym for “five-dollar cost reduction”. The us to reduce the raw materials input for 1 kg of polysilicon at a lower cost name is a reference to our original goal to reduce the to just 1.06 kg. This alone is a remarkable accomplishment per-kg manufacturing cost of polysilicon by USD 5. considering that the global top-tier makers require between 1.15 kg and 1.2 kg of raw materials in their processes. We Taking into account costs that were beyond our control such also made dramatic reductions in the area of electricity as foreign exchange rates, utility rates, raw materials costs, consumption. If we assume the per-unit cost of electricity and depreciation costs, we have achieved a 23% reduction in for China-based manufacturers represents the 100% level, we manufacturing costs since 2010. If the effects of those previously were able to lower our cost from 70% in 2013 to 66% in 2014. mentioned costs are excluded, we achieved a 33% reduction. Third, we set up a dedicated team to systematically manage the project. Putting target setting and performance Why was OCI’s polysilicon business the evaluation under the direct management of the FCR focus of your cost reduction efforts? team improved efficiency and enabled the project to move steadily forward throughout the year. Materials cost, processing and operating costs, fixed costs, and variable costs all play a part in determining how much it costs to manufacture a product. Like most companies, cost reduction is an Where do your cost reduction efforts go from here? ongoing process at OCI. However, the extended global slump and oversupply in the solar PV industry that started in 2011 has pushed We have set a goal of reducing polysilicon manufacturing polysilicon selling prices down 75% from USD 80/kg to the current costs by an additional 39% over the next five years, USD 20/kg level, making radical cost-reduction a top priority. excluding the impact of exchange rate fluctuations and other external factors. We also expect to see another major drop in manufacturing cost starting in 2016 after the P1 How did you achieve such dramatic results? polysilicon plant is fully depreciated at the end of 2015.

There were three basic reasons. First, we focused on qualitative Our cost innovation also continues with the P3.9 debottlenecking rather than quantitative performance measurement. One project scheduled for completion in February 2015. When of the key drivers was a paradigm shift in target setting. we built our first polysilicon plant, the capex cost was USD Rather than setting some absolute figure, we set a ratio. In 84/kg. Since then, we have expanded capacity four times, practice, we calculated the unit cost for each cost factor reducing capex cost by more than 87% along the way. and then set a cost reduction ratio for each factor and The P3.9 project is expected to have a capex cost of just encouraged the teams responsible to achieve those targets. USD 11/kg, setting a new benchmark for the industry.

FCR polysilicon manufacturing cost reduction results Polysilicon manufacturing cost reduction roadmap

100% 100%

77%

23% 39% 61% cost reduction cost reduction target

2010 FX Utilities Materials Depreciation Others 2014 2014 Materials Utilities Depreciation Others 2018E (1) Assuming 100% utilization ratio (1) Assuming 100% utilization ratio (2) Applied FX rate of 1,098 KRW/USD

Polysilicon OCI Annual Report 2014 25 Great place to work

Safety requires constant vigilance. The Safety Culture Improvement project has significantly improved safety and sustainability across our operations over the past two years. Today, we are well on the way to achieving world-class safety performance to protect our employees, communities, and the environment.

Mission Solar Energy, Texas, USA

Commitment to safety world-class safety performance re-evaluated all processes strengthened reporting system. Building on the safety mindset on enhancing communication, doesn’t happen overnight. We to identify particularly risky instilled by the SCI project, we participation, and discussion, Over the past two years are committed to investing processes that require approval As previously mentioned, are now preparing our SH&E strengthening risk evaluation since we launched the Safety the time and ongoing effort and supervision, established we expanded our safety strategy for the rest of the and monitoring efforts, and Culture Improvement (SCI) to achieve the highest level a central crisis response management system decade as we aim to achieve upgrading the capabilities of project with DNV GL in 2012, of safety to protect our headquarters, and carried out performance objectives from world-class performance our SH&E team. We will also be we have made significant employees, communities, and emergency response drills 9 to 11 areas in 2014. We also in this crucial area. As our focusing on off-the-job safety progress in improving safety the environment. at our plants to prepare for increased the safety indicators integrated safety management because safety in the workplace and sustainability across all specific accident scenarios. from 22 to 68 and changed system continues to mature, fundamentally begins with how aspects of operations. As During 2014, we focused from a 200-point scale to a we are moving beyond a focus our people practice safety in the SCI project came to a on helping plant personnel A total of five safety incidents 1,000-point scale to help better on discipline and control to their personal lives. close at the end of 2014, DNV correctly recognize and occurred at our Korean track all facets of safety and emphasize internalization and GL once again conducted a respond to safety factors manufacturing facilities in identify areas for improvement. independent action. Future comprehensive review of our through weekly training 2014, none of which resulted Expanding system coverage areas of improvement will focus safety management system, sessions as well as setting in fatalities or hospitalizations. to our suppliers and upgrading our International monthly safety themes to We attribute this improved subcontractors was a major Safety Rating System reinforce safety practices. From performance in large part to development during the Accident frequency rate Accident severity rate (ISRS) level from Level 3 to a monitoring and evaluation the new safety mindset now year. We are now working Level 5 and Safety Culture standpoint, we expanded our firmly ingrained across the closely with each partner to 1.0 0.10 0.69 Assessment (SCA) level safety management system organization. We also continued ensure their staffs are trained 0.8 0.08 0.063 from Level C (Calculative) to performance objectives to reduce our accident severity and equipped to uphold our 0.6 0.40 0.06 0.033 Level B (Proactive). While we from 9 to 11 areas to include rate from 0.033 to 0.030. The commitment to safety across 0.4 0.25 0.04 0.030 Pohang plant, Korea are pleased with this rapid supplier and subcontractor accident frequency rate was up the entire supply chain, from 0.2 0.02 improvement, we realize that safety management. We also slightly for the year due to our raw materials to product delivery. 2012 2013 2014 2012 2013 2014

Safety management roadmap Upgrading our In 2013, a safety incident at OCI The Yeongju plant of OCI Materials experienced a safety incident in 2013 Materials prompted us to review that prompted a thorough review of our safety management system and Since initially measured by DNV 1 2 3 4 5 6 7 8 9 10 safety performance GL in 2012, our International the safety of all OCI plants in Korea safety at all plants in Korea. Between November 2013 and September Safety Rating System level has that year. While no additional 2014, we invested KRW 22 billion to upgrade the safety and environmental risen from Level 3 to Level 5. At serious deficiencies were found, facilities of the plant to prevent future incidents. Among the key facilities 2012 2014 the same time, our Safety Culture the review provided a timely installed were scrubber systems to handle vent gas and enclosure systems Assessment level has improved opportunity to upgrade our safety with water curtains and scrubber systems to prevent and contain any from Calculative to Proactive. ISRS posture, procedures, and facilities. spills during the product loading process. The Yeongju plant resumed Our long-term goal is to achieve 2012 2014 SCA production in the final quarter of 2014 and has been incident-free since. world-class performance in each Yeongju plant, Korea E (Pathological) D (Reactive) C (Calculative) B (Proactive) A (World class) of these benchmarks.

26 Management Review OCI Annual Report 2014 27 Great place to work

A company can only be as great as its people. In every aspect of operations, we are working to create an environment that fosters collaboration, excellence, and personal growth to empower our people to achieve their full potential so we can achieve ours.

Commitment to people 6-week induction program and in business essentials such as advance in this area in 2014 bi-annual workshops for first- cost accounting and Chinese was the launch of a new policy As an employer with year employees, mandatory and language proficiency. We began emphasizing compensation subsidiaries around the globe, specialized programs for each working to foster a more- based on capabilities and we understand the power of position level, and the OCI-MBA conducive environment for performance. diversity in building a world- program for managers and brainstorming and collaboration. class organization. We actively team managers. We also have We also declared OCI to In 2014, we awarded the recruit and hire high-caliber overseas training programs for be a smoke-free workplace first “Above and Beyond” candidates from diverse our engineers. Since 1986, we and continued to encourage Executive of the Year award backgrounds. Our Korea have sent chemical engineers to employees to maintain healthy to acknowledge exceptional headquarters staff includes a the US to participate in a 6-week lifestyles by being physically fit. initiatives to improve company growing pool of talent from program. We are planning performance. The 2014 award the United States, United to add similar programs for We also made some was presented to Executive Kingdom, Belgium, South mechanical and electrical significant organizational Vice President and Gunsan Africa, Columbia, China, France, engineers in the near future. changes in 2014. We initiated Plant Head Kwan Heo for his Germany, and Singapore. We a consolidation process to leadership in a successful are also investing in women’s Our ongoing organizational integrate teams in order to cost reduction program that leadership development to focus is on promoting what strengthen work efficiency achieved a permanent USD 200 help them reach their career we call the “3-UPs”. These across the organization, taking million reduction in polysilicon development goals. include “Basics-up” focusing into account the expertise of production costs. on expertise, “Idea-up” each team. This led to a 20% We operate a number of focusing on creativity, and reduction in team count during Helping lead Steve Elliott has been working What’s the secret to being a successful manager? systematic talent development “Health-up” focusing on self the year. at the OCI Alabama plant since programs to equip our people management. We believe that the way 2002 when it was a brand-new It’s not a secret, but the key to success is the philosophy of “management with the skills and knowledge being a recognized expert We take great pride in the facility. Since then, the sodium by walking around.” Getting out in the plant, being visible and available they need to succeed in the in our respective fields is of pragmatic, win-win employee percarbonate plant’s capacity has to employees, letting them ask questions, listening to what they have to global marketplace. These the utmost importance. In relations we have forged over been increased from 40,000 say—you’ll always find new ideas and suggestions for improvements if programs include an immersive 2014 we focused on training the past two decades. A key to 50,000 metric tons and Steve’s you just walk around and talk to people, get to know them. Being fair and many talents have helped him objective goes a long way, too. Steve Elliott Plant Manager, OCI Alabama rise through the ranks to become plant manager. What accomplishments are you particularly proud of?

Encouraging MBA program Programs for engineers When we achieved the 1 million safe man-hours without a lost-time professional career - 319 graduates - 6-week overseas training program for chemical engineers incident. We’ve now gone over 12 years without a lost-time incident. I’m - 12-week, 188-hour program - 4-6 week program for electrical and mechanical engineers, really proud of the team here at OCI Alabama, what we’ve been able to development including 2 weeks in-field experience in US operations accomplish in turning the business around, and that we’re profitable. (Starting in 2015)

28 Management Review OCI Annual Report 2014 29 Environmental commitment In the area of water in state-of-the-art pollution we will be devoting significant 90 GHG reduction projects consumption, usage increased control and abatement resources to comply with over that will enable us to operate by 2.1% in 2014. While we facilities to further improve the the next few years. within our emissions permit continued to make headway environmental performance of allocation during the scheme’s in efforts to reduce water our operations. We launched initial three-year period running Every business activity has an impact on the environment. usage through recycling at projects to upgrade the GHG mitigation strategy through 2017. Through operational and environmental excellence across the Pohang and Gwangyang wastewater treatment facilities plants, that savings was more at the Gunsan, Pohang, and We are an active participant In 2014, our operations emitted the organization, we aim to reduce the amount of resources than offset by a 33% increase Gwangyang plants. We also in Korea’s efforts to reduce approximately 2.72 million tons

in polysilicon production at the invested in facilities to prevent both direct and indirect of CO2, roughly 5.7% more than we consume as well as the emissions and waste we generate Gunsan plant. Despite this spike leaks of hazardous materials greenhouse gas emissions. In the previous year primarily to help preserve the environment for future generations. in consumption, overall water to improve safety at the Iksan each of the three years since due to a 33% increase in usage has been on a downward plant. we completed implementation polysilicon production volume.

trend for the past three years. of GHG emissions monitoring The fact that CO2 emissions The Korean government and management at all Korean increased only a fraction of this Maintaining high standards operates the Green Company manufacturing sites in 2012, major increase in volume is a for air and water quality and Green Technology we have met emissions and testimony to the success of Commitment to the resource usage and pollution In the area of energy recycling ratio fell from 75.6% at all plants is another certification programs to energy consumption reduction our cost reduction programs in environment emissions of all kinds. We are consumption, usage rose to 68.4% in 2014. However, core component of our promote the development targets set by the Korean achieving dramatic reductions using process innovations 17.6% to 46,377 TJ in 2014. This we succeeded in reducing environmental strategy. While of environmentally friendly government. As Korea’s cap- in energy usage in our We believe that environmental and optimizations as well overall increase was driven by the waste generated per standards vary by plant and products and technologies. and-trade emissions trading polysilicon operations. stewardship is good business. as increased utilization of increased production across our unit at the Pohang plant by process, the specialty chemicals In 2014, we received Green scheme launches in 2015, we We are actively working to by-products and recycling product portfolio, led by the recycling waste oil and scrap line at the Gunsan plant limits Technology certification for are moving forward with over reduce our environmental to systematically reduce per- polysilicon business. wood and the Iksan plant by NOx emissions to 80% of the our polysilicon and fumed impact at each plant site, taking unit consumption of energy, optimizing the alumina catalyst legal limit. Similarly, the Pohang silica vacuum insulation a comprehensive approach materials, and water across all In the area of materials replacement frequency. plant limits the chemical panels. We also received Green that focuses on reducing manufacturing operations. consumption, the overall waste oxygen demand value for water Company certification in 2014, to 30% of the legal limit. In a designation awarded to 2014, we continued to invest companies that generate over 30% of overall sales from Green Technology-certified products.

CO2 emissions The year 2015 will usher in

Total emissions (in ktCO2) a new regulatory regime for Year on year chemical makers as Korea’s 2,718 Act on the Registration & 5.7% 2,700 Evaluation of Chemicals known as K-REACH comes into force. 2,600 2,630 2,571 Aimed at protecting public 2,500 5.5% 2.3% health and the environment, the act imposes strict reporting and Soil remediation, Pohang plant, Korea 2012 2013 2014 screening requirements that

Soil remediation In February 2015, we officially Although the issues pre-dated our purchase of the plant sites in completed the cleanup and 2000, we felt a moral responsibility to take care of them. Launched projects completed remediation of pre-existing soil in 2012, the KRW 10.4 billion cleanup effort covered 41,478 m2 at the and groundwater contamination two plants. Our EvenOX product for soil remediation played a key role issues discovered at the Pohang in the cleanup. We also installed facilities to process contaminated and Gwangyang plants in 2010 groundwater and removed contaminated soil at the point of and 2011. contamination and surrounding areas. In March 2015, we reported the completion of the project to local environmental authorities and Alamo 2, Texas, USA received a clean bill of health following final inspections.

30 Management Review OCI Annual Report 2014 31 Social responsibility

Businesses are in a unique position to make a positive difference in their local communities. In 2014, we invested over KRW 1.2 billion in community service and welfare, education and scholarships, and culture and the arts to make our local communities better places to live and grow.

The Paudwar School, Nepal

Community engagement bread with the Korea Red Cross, students from low-income, museum’s third bi-annual Solar responsibility a portion of each school’s lighting, and basic medications served meals to the elderly and multi-cultural families during touring event since the program power needs, the project to help improve the Although social investment homeless, and assisted at the the year, bringing total was launched in 2010 to bring The Solar School project aims to teach students the educational environment in declined 50% to KRW 1.2 billion Summer Special Olympics. They scholarship recipients from more cultural opportunities installed solar PV systems at principles and process of solar this underdeveloped region. in 2014 due to the challenging made winter a little warmer that program to over 300 to regions not normally on a total of 22 primary schools power generation to increase business environment and the in Korea by collecting and since its inception in 2011. The the cultural circuit where we across Korea in 2014, including awareness of renewable energy conclusion of certain projects, distributing unused clothing foundation also sponsored have operations. Featuring 17 in North Chungcheong as well as help inspire the Solar school Nepal solar project our people continued to take the and delivering coal briquettes. a two-day temple stay 30 works encompassing Province and 5 in South next generation of creative lead in reaching out to their local They also knitted hats for infants program to give recipients paintings, sculptures, and video Chungcheong Province. We engineers and scientists. communities, increasing their in undeveloped countries as of the latter scholarship works from 18 artists in the have now installed systems at volunteer hours by over 10%. part of a new initiative started program an opportunity to Young Creatives and artist-in- 182 schools to date and expect The Solar School program in 2014. A total of 240 hats network and enjoy a unique residency programs, the eclectic to complete installation at 60 took on an international The Angel campaign and were donated to Save the cultural experience. exhibition visited the cities of more in 2015. dimension in February 2014 volunteer organization is the Children in December for Gwangyang, Pohang, Yeongju, when we traveled to Nepal to public face of our community distribution in Ethiopia, Uganda, and Gunsan for two-week runs We launched this KRW 10.5 install 1.1 kW solar PV systems service efforts. Launched and Tajikistan to help keep OCI Museum of Art between April 3 and May 28. billion initiative in 2011 with at schools in the remote back in 2006, it gives OCI infants warm through daily the goal of donating and mountain villages of Nangi employees and their families the temperature ups and downs. Opened in 2010, the installing free solar PV systems and Paudwar in the Annapurna • Location: Korea • Location: Nepal opportunity to use their money, museum organizes and hosts at a total of 300 primary region. In addition to the Donations • Period: April 2011 - March 2016 • Period: 2013 - time, and talents to brighten exhibitions of noteworthy schools across Korea through systems, we also provided • Status: 181 out of 300 systems • Status: 8.4 kW for 4 schools and a In KRW bn their local communities. Through SongAm Foundation Korean contemporary artists 2016. Beyond providing the the schools with a notebook installed (61% complete) lodge completed the Angel campaign, employees throughout the year. In addition practical benefit of meeting computer, projector, LED • Plant scale: 5 kW per school donate a small portion of each Founded in 1979, the to the OCI Young Creatives 2.4 paycheck to benefit worthy foundation operates two program launched in 2009 to 1.2 charities and individuals, raising scholarship programs to help emerging Korean artists nearly KRW 168 million in 2014. help worthy high school and reach a wider audience, the Interview Dr. Mahabir Pun is a Nepalese How is PV facility installation a practical help to remote villages? Angel volunteers spent over university students pursue museum also operates an 2013 2014 educator and the founder of 5,000 hours lending a helping their educational dreams. In artist-in-residency program Nepal Wireless Networking More than 50% of the villages in the remote high mountains of Nepal don't hand wherever needed during 2014, the SongAm Foundation in Incheon, providing living Dr. Mahabir Pun Project (NWNP). Through this have electricity. Even if there is electricity, there is a chronic shortage Volunteer hours Founder / Program director the year. They delivered 20 kg Scholarship presented and studio space to eight Himanchal Education Foundation project, Pun uses wireless of power primarily due to government rationing that limits energy bags of rice to 100 families awards to 14 high-school talented artists annually. 5,153 technologies to develop remote transmission to less than 12 hours a day. Solar PV installations can greatly in Seoul’s Seongbuk-dong and 26 university students 4,665 villages in the Himalayas. relieve this hardship, allowing people to continue their activities at night neighborhood. They visited Holt selected for their outstanding In 2014, the museum hosted His efforts to enhance people’s by bringing light and water into their homes. Another issue is that people Ilsan Town and treated special academic performance. seven exhibitions, including standard of living has been living in those areas can be easily isolated due to difficult geographical needs residents to a day out at The SongAm Multi-Cultural six solo exhibitions and a recognized internationally. reasons. Wireless networks powered by PV facilities enable them to local attractions. They served Family Scholarship separately touring exhibition. Entitled connect to the outside world and reduce the information gap problem as as guide runners for the blind presented awards to 86 “Sharing Star Journey”, the well. Support for solar PV installations is a great help for the villagers. at two fun runs. They baked high-school and 14 university latter exhibition was the 2013 2014

32 Management Review OCI Annual Report 2014 33 Basic chemical

Capacities Sales by market Our products Delivering superior quality In metric tons 1 4 and purity to bring greater value 42,000 32.9% Korea Polysilicon Chemical reagents Polysilicon 42,000 42,000 to downstream industries 0.2% Rest of world Soda ash Pharmaceutical ingredients 2,308,000 Nitrogen trifluoride (NF3) 5.7% Europe Monosilane Soda ash 2,260,000 2,100,000 Hydrogen peroxide (H O ) 2 2 2 KRW Fumed silica 2,107 bn NF 6,600 Calcium chloride 3 7,500 7,200 Caustic soda 20.2% Asia Hydrochloric acid 85,000 19.2% China Phosphoric acid H2O2 85,000 85,000 21.8% Americas Sodium percarbonate

2012 2013 2014 Sodium hypochlorite *Before adjustment for consolidation

Sales rose 15.2% to KRW 1 Polysilicon electricity prices. We continue February 2015, total nameplate the natural soda ash industry. reaching 80% of capacity at negatively influenced this high-quality solution to the 2,107 billion in 2014, to actively focus on efficiency capacity will rise to 52,000 In 2014, OCI Resources once year end. business in 2014. Aggressive market. positively impacted by This raw material is the primary improvements in this area that metric tons, further reducing again achieved solid growth as marketing by regional an increase in polysilicon material used to manufacture accounts for the largest portion per-kg fixed and variable market prices rose 2.9% and In response to improving competitors pushed down We have a broad portfolio of average selling prices as solar PV cells and modules and of manufacturing costs. costs to enhance our cost sales volume rose 2.3%. market fundamentals, average selling prices, while hydrogen peroxide products well as increased sales of semiconductor wafers. competitiveness. OCI Materials launched an rising imported feedstock costs in various concentration and specialty gases and soda ash. Our innovative production expansion project at its No. 5 and utility prices led to higher purity levels. Our product 3 EBITDA rose 55.8% to KRW Improving market supply technologies continue to make Nitrogen trifluoride (NF3) plant in Yeongju in October manufacturing costs. portfolio includes industrial 490 billion, benefitting from fundamentals helped boost us a cost leader in the market 2 Soda ash 2014. When completed in the grades, electronic grades, significant cost reductions polysilicon prices in the first as we deliver the consistently This gas is used to etch second half of 2015, the project Notwithstanding these food additive grades, low achieved by our polysilicon quarter of 2014. However, high quality that wins and This basic raw material is silicon wafers and clean will boost capacity by 1,000 difficulties, this business TOC, and ultra-high-purity business as well as increased reduced profits in downstream keeps customers. The new FCR widely used to manufacture semiconductor, LCD panel, and metric tons, expanding the is steadily recovering its products, backed by industry- profitability in the previously industries put downward or five-dollar cost reduction glass, chemicals, and photovoltaic cell manufacturing company’s industry-leading profitability. We increased leading technology and mentioned businesses. pressure on prices starting initiative launched in 2014 has detergents. equipment. capacity to 6,600 metric tons sales of high-value-added production know-how. We

in the second quarter. In the resulted in a permanent cost as well as enhancing its ability electronic grade H2O2 and continue to develop products fourth quarter, prices began to savings of USD 200 million, and Unlike the United States where We profited from rising to win business from major strengthened ties with major for new and higher-value-

rise again as China announced we continue to pursue savings the majority of soda ash is demand and prices for NF3 semiconductor manufacturers customers in the paper, PCB, added applications in various new incentives, spurring in all areas of production. produced from natural trona, in 2014. OCI Materials’ 5,600 across the region. and textile industries. We industries. delayed projects to move Another strength is our soda ash produced elsewhere metric ton Yeongju plant also launched EvenOx, a forward and local governments portfolio of long-term supply is often the product of energy- in Korea operated at full hydrogen peroxide-based soil

to focus on promoting contracts that helps insulate intensive synthetic processes. capacity to meet demand. 4 Hydrogen peroxide (H202) remediation product. EvenOx distributed generation projects. us from short-term market The high cost of those The company’s 1,000 metric is a unique product because volatility. processes puts synthetic soda ton plant in Jiangsu, China This chemical is used as an it was developed entirely We achieved our highest ash producers at a competitive also ramped up production, oxidizing agent in various with in-house technology in production and sales volume Looking ahead, we disadvantage, leading to a applications such as bleaches, response to a specific need to date in 2014, operating at launched a USD 110 million number of plant shutdowns feedstocks, preservatives, for a soil remediation solution full capacity to meet demand debottlenecking project across the industry in 2014. sterilizers, and etching/cleaning for pre-existing contamination from long-term customers. at the P3 plant in Gunsan, agents in the manufacture of discovered at the Pohang and This enabled us to reduce Korea in March 2014 that will Operated by OCI Resources, 3 various electronic appliances. Gwangyang plants. EvenOx per-kg fixed costs and contain raise production capacity by our US soda ash business proved to be highly effective manufacturing costs in the face 10,000 metric tons. When the continues to be one of the Continued global oversupply in this application, and we are of steadily increasing industrial P3.9 project is completed in most competitive producers in and increased production costs proud to be able to offer this

34 Business Review OCI Annual Report 2014 35 Petrochemical and Carbon materials

Capacities Sales by market Our products Investing to meet the growing In metric tons needs of industry with world-class 270,000 65.9% Korea Carbon black Plasticizer (DOP) Carbon black 270,000 270,000 quality and capacity 3.3% Rest of world Toluene di-isocyanate (TDI) Phthalic anhydride Pitch Aromatic polyester polyol 50,000 16.0% Asia TDI Benzene, Toluene, Xylene (BTX) Mixed xylene 50,000 50,000 Naphthalene Carbofuran 4 3 372,000 ISO quinoline KRW 1,166 bn Pitch 360,000 Indene oil 340,000 Xylenol Quinoline 160,000 1 14.7% China BTX Cresol 160,000 160,000 0.2% Americas Phenol

2012 2013 2014 Wash oil *Before adjustment for consolidation

Sales were down 8.2% to KRW 1 Carbon black to 350,000 metric tons. of our major customers in Korea approximately 75% of sales came for aluminum, we continued Slated to begin commercial 5 Other aromatics 1,166 billion in 2014, impacted completes an expansion project. from overseas, we also captured to maintain a high capacity production in early 2016, this by the steep fall in oil prices This material is produced by Given the fundamental more than 30% of the Korean utilization rate to improve cost new plant and the existing Phthalic anhydride is used in as well as global oversupply the incomplete combustion of oversupply situation in the market despite increasing competitiveness and meet 380,000 metric ton Shandong plasticizers and unsaturated in key businesses. EBITDA hydrocarbon fuels. It is primarily global carbon black market, 2 Toluene di-isocyanate (TDI) competition and falling prices. both existing and new long- OCI plant will position us polyester resins. Plasticizers was down 19.5% to KRW 102 used as a reinforcing filler in we continue to strategically term agreements with global to aggressively pursue new are used to soften PVC billion due to lower average tires and other rubber products shift our focus to higher- This chemical is normally We have a number of unique top-tier smelters. This strategy growth opportunities in plastics to produce products selling prices triggered by as well as a color pigment in value-added markets such as reacted with polyol to cost advantages in this business. enabled us to increase coal this strategic market. such as wire insulation, the previously mentioned plastics, paints, and inks. specialty black and mechanical produce polyurethane for We produce the primary chlorine tar processing capacity by wallpaper, floorcoverings, factors. The exchange rate rubber goods. We expect this applications ranging from and hydrogen feedstocks 21,000 metric tons to 388,000 and automotive sealer. was not a significant factor The global carbon black strategy to begin to deliver furniture, automobiles, needed to make TDI. We metric tons and maintain 4 BTX in either of these results. market continued to see tough results in 2015 as we complete electronic components, and have the capability to use the profitability at 2013 levels. Phthalic anhydride prices competition in 2014 due to the upgrade and expansion of shoes to paints and resins. main production by-product, These three chemicals are declined during the year as stagnant growth in the global a low-grit production facility anhydrous hydrogen chloride, Over 60% of our coal tar-based feedstocks used to make demand in China stalled. tire industry and growing in Korea and step up R&D to Higher export prices and in other processes. We have products are used as the primary countless other petrochemicals. However, falling orthoxylene competition from low-cost target new opportunities in growing sales to markets in also lowered our dinitrotoluene feedstocks for our carbon Benzene is used in styrene and naphthalene feedstock producers in China. Despite the these more profitable markets. Africa, the Middle East, and feedstock costs by recently black and phthalic anhydride monomer, phenol, and prices had a positive impact unfavorable market, we achieved South America helped us grow signing a long-term contract. businesses. Another benefit of methylene diphenyl di- on profitability. This, combined solid profitability backed by a Looking ahead, we continue to both sales and profitability Together, these advantages maximizing production is that isocyanate (MDI). Toluene and with relatively high selling prices competitive edge in feedstock refine and improve production in 2014. We sold 50,000 position us for future growth. we are able to improve cost xylene are used as organic in Korea, helped us improve procurement, cost savings in processes to enable us to flexibly metric tons of TDI during the competitiveness both directly solvents or as a raw material our 2014 performance. logistics and other areas, and utilize either oil-or coal-based year, equaling our nameplate in this product category and in synthetic detergents, a steady shift in our product feedstocks to maximize cost- production capacity. While 3 Pitch downstream businesses. pigments, and resins. Plasticizer prices also declined portfolio toward higher-value- competitiveness in any market further in 2014 due to a added products. We also broke environment. We expect to This material is used as a binding We also continued to expand While international benzene decrease in prices for raw ground in October for an 80,000 significantly grow sales to agent in high-quality anodes our coal tar distillation capacity prices rose in early 2014, falling materials such as octanol and metric ton plant in Shandong, Japanese tiremakers thanks to for aluminum smelting, graphite with a focus on China in 2014. oil prices, slowing growth in phthalic anhydride. However, China to meet growing demand the custom shipping container electrodes, refractory bricks, In September, we partnered China, and rising supply as a 15% increase in sales in the region. When completed system we have developed to and water-proofing products. with Maanshan Iron & Steel new capacity came online volume helped us improve in early 2016, the 80,000 eliminate logistics issues as a Company to set up a joint led to falling prices and lower profitability for the year. metric ton first phase will boost barrier to sales. We also expect 2 As the sluggish global economy venture 350,000 metric profitability throughout the global production capacity to see sales rise in 2015 as one in 2014 dampened demand ton plant in Anhui Province. second half of the year.

36 Business Review OCI Annual Report 2014 37 IPP Business — Solar energy IPP Business — Cogeneration plant

Partnering to promote renewable energy, Building the energy infrastructure that will power create jobs, and improve quality of life tomorrow’s industries in Saemangeum

The Alamo project in the US We boosted capacity in operation state of Texas surpassed the in the US market from 47 MW to 100 MW milestone in 2014 92 MW with the completion of as we stayed on schedule three projects in 2014, including to complete the 400 MW Alamo 2 (4.4 MW) and Alamo 4 project in 2016. Together with (39.6 MW) in Texas and Lavonia our partners, we continue to (0.8 MW) in Georgia. We broke develop the new technologies ground for Alamo 3 (5.5 MW) that will enable us to lead in and Alamo 5 (100 MW) in Texas delivering more efficient and as we accelerated progress on cost-effective solutions for the 400 MW Alamo project. We an industry that is expected also monetized our investment to grow an average of in the Alamo 4 plant by selling over 10% annually through 80% of our equity interest. Alamo 1, Texas, USA Cogeneration plant, Saemangeum, Korea the rest of the decade. In Korea, the solar PV market suffered a major setback as the domestic price of renewable September 2014 favoring into new markets. With the The new Saemangeum Backed by expertise gained cogeneration plant to date. as an opportunity to make a energy certificates fell sharply projects up to 20 MW will drive exception of projects in the cogeneration plant is a key in building and operating significant contribution to local and the system marginal price further development in the Americas, which are managed part of the infrastructure at captive cogeneration plants Since breaking ground in development and quality of dropped below 2013 levels. We distributed generation market. by San Antonio-based OCI a new industrial complex at the Incheon, Gwangyang, October 2013, the project has life in the Gunsan region, an completed three projects during We are currently laying the Solar Power, all planning is now taking shape on Korea’s and Pohang plants over the met all construction milestones area that is also home to our the year, including a 5 MW plant groundwork to tap the immense now being handled from western coast. Slated to past five decades, we are to pass the 67% completion polysilicon, TDI, and fumed for the Dongwon Group, the potential of this fast-growing our Seoul headquarters begin commercial operation currently building a state-of- milestone at the end of 2014. silica production facilities. 2.8 MW Gangbuk plant, and the market in the years ahead. with a focus on developing in 2016, the state-of-the-art the-art cogeneration plant in Scheduled to begin commercial By delivering high-quality, 700 kW Jichuk plant, bringing opportunities in Japan, China, plant will deliver high-quality, the Saemangeum Industrial operations in early 2016, the low-cost power and steam, capacity in operation to 19.3 MW. In 2014, we established the India and North Africa. low-cost power and steam to Complex through subsidiary first phase of the plant will the cogeneration plant will Global Solar Department give customers a fundamental OCI SE. Located on 162,153 produce 303 MW of power help make the Saemangeum China is already a large market to oversee all solar-related competitive advantage. square meters of reclaimed land and 860 tons/hr of steam for Industrial Complex an attractive for solar PV energy and the companies and operations on Korea’s west-central coast, industrial customers, generating place for manufacturers to new policy announced in and coordinate our advance the Saemangeum cogeneration at least KRW 200 billion in sales locate as well as advance a project leverages our expertise and a solid operating profit. number of national priorities in the field and the best available such as energy efficiency and technology to build the nation’s Beyond the solid revenue greenhouse gas reduction. cleanest and greenest coal-fired prospects, we view this project

Projects in progress Capacity in progress Capacity in operation

In MW (AC) In MW (AC)

Korea 18+ 20 7 Korea 19.3 Construction period Capex Plant capacity 15+ North America 400

5+ Emerging markets 170 47 Phase 1 Q4 2013 - Q1 2016 KRW 550 bn Power 303 MW Steam 860 tons/hr North America 92 38+ Total 590 Phase 2 2016 - To be determined To be determined

2013 2014

38 Business Review OCI Annual Report 2014 39 Research &

Recently commercialized products Development R&D network expand ties with outside organizations through a wide Sapphire materials capacity ENERVAC capacity We continued to lay the range of research projects. Developing and refining the technologies groundwork for a global R&D We currently have projects 4 million mm of TIE units 1,000,000 m2 and processes that help us lead our network in 2014. In 2015, underway in partnership with we plan to set up a joint institutions such as Oxford industries in quality and cost structure R&D center with US-based University in the UK and subsidiaries OCI Solar Power, Southwest Research Institute Applications Applications Mission Solar Energy, and Sun in the US state of Texas. • LED lighting • Building insulation Action Trackers in the San • Optical windows • Refrigerators • Mobile devices • Temperature-controlled Antonio, Texas area to pursue packaging joint projects that build on • Cold and hot water purifiers the combined experience and expertise of these firms in the solar PV development field. We will also continue to

The OCI R&D Center is our 2014 activities both process innovations and of our chemicals and carbon hub of innovation. Building on optimizations. We created a materials businesses through a core technical foundation In 2014, we laid the foundation promising new revenue stream improved processes and in chemicals and chemical for greater collaboration by developing a high-purity products. The carbon black engineering, the center’s between our businesses, plants, precursor hexachlorodisilane business will be an area of multi-disciplinary expertise and R&D center as we focused used in semiconductor chip particular focus as we continue spanning the electrical, on upgrading our organization manufacturing. We also to closely coordinate R&D mechanical, metals, and and processes to the next level. continued to make steady efforts with each business to nanomaterials fields is now We implemented a select-and- progress in the energy better support their mid- to enabling us to achieve our focus strategy to advance key storage system field by long-term business strategy. cost reduction goals, prepare R&D projects and realigned our completing development products and processes for R&D portfolio to facilitate closer and initiating testing of a commercial production, and collaboration. We adopted a prototype 125 kW-class Intellectual property create the new products functional-matrix organizational vanadium redox flow battery that will drive future structure to enhance flexibility (VRFB), one of the largest As of the end of 2014, we growth and profitability. and create synergy and a produced to date in Korea. held a total of 124 patents, research specialist program including 31 in countries other to foster specialization and than Korea. Our intellectual ownership. We also worked to 2015 plans property portfolio continued improve planning to sharpen to steadily grow as we filed our business feasibility Looking ahead, we will continue 57 patent applications in Korea, evaluation capabilities and to build on the progress up 72% from the 33 we filed in improve R&D outcomes. made in 2014 as we focus on 2013. Two of the key patents generating outcomes that we were granted in Korea We had a number of significant contribute directly to the covered optimizations for R&D achievements during bottom line. We will step up vanadium redox flow batteries the year. Our ongoing cost support for business projects and coal pitch properties. reduction efforts were and take a more proactive particularly successful in the approach to collaboration. polysilicon field, where we Toward that end, we have achieved major reductions in launched a project focused on OCI R&D Center, Korea energy consumption through upgrading the competitiveness

40 Business Review OCI Annual Report 2014 41 Governance Board of directors

Strengthening the independence and transparency of our corporate Inside directors Outside directors governance to enhance corporate value and ensure sound, transparent decision-making SooYoung Lee YongHwan Kim Chairman and Representative Director • Former Chairman, OCI Enterprises • Representative Lawyer, Law Office of Kim & Park Co. • Former Chairman, Korea Employers’ Federation • Former Director, KT&G Social Welfare Foundation • Former Chairman, Incheon Chamber of Commerce & Industry • Former Prosecutor • Former Advisor, Korea International Trade Law Association The OCI board’s scope of authority includes setting the agenda for the general shareholders’ meeting, decisions and changes regarding the company’s fundamental management direction, and all matters related to finance and investments. It is composed of a total of seven directors, four of whom are outside directors. These outside directors serve staggered three-year terms to enable WooSug Baik JongSin Kim Vice Chairman and Representative Director them to evaluate issues with a longer-term view as well as foster specialization. This group currently • Former Executive Vice President, Oriental Chemical Industry • Former President, Industry-Academia-Government includes a lawyer and professors in the fields of technology-based management and economics, • Former President and CEO, eTEC E&C Limited Collaborative Education Course, Sanhakyeon Center giving us valuable expertise and feedback on our strategic direction and current issues from a broad • Former Secretary-General, The Board of Audit and Inspection of Korea spectrum of perspectives. • Former Commissioner and Acting Chairman, The Board of Audit and Inspection of Korea The board is chaired by the chairman. While the chair has sole authority to convene meetings, individual directors can request that meetings be convened by submitting their proposals and WooHyun Lee SangSeung Yi rationale to the chair. Board decisions require the presence of a simple majority of the directors President and Representative Director and approval of a majority of those present. Directors are prohibited from voting on any particular • Former Senior Executive Vice President, OCI Company • Professor, Economics, Seoul National University • Former Vice President, CSFB (Hong Kong) • Former Associate Professor, Economics, Sogang University agenda item in which they may have a potential conflict of interest. • Former Managing Director, Capital Z Partners (Seoul) • Former Assistant Professor, Economics, Dartmouth College

In addition to its monthly meetings, the OCI board holds additional meetings on an as-needed basis. In 2014, the board met 16 times and the Audit Committee met 6 times.

JahngShick Bahn

Board committees • Dean, Sogang Graduate School of Management of Technology • Former Dean, Sogang Institute of Advanced Technology Outside director nomination committee • Former Vice Minister, Ministry of Planning and Budget SangSeung Yi / SooYoung Lee / YongHwan Kim / JongSin Kim / JahngShick Bahn

Audit committee JongSin Kim / YongHwan Kim / SangSeung Yi / JahngShick Bahn

Steering committee SooYoung Lee / WooSug Baik / WooHyun Lee / JongSin Kim

Compensation committee YongHwan Kim / SooYoung Lee / SangSeung Yi / JahngShick Bahn

42 Management & Operations OCI Annual Report 2014 43 Global network 9. OCI CHEMICAL CORP. 10. OCI SOLAR POWER LLC 11. OCI WYOMING LLC 12. OCI ALABAMA LLC 5 Concourse Parkway, Suite 2500 300 Convent St, Suite 1900 254 County Road, 4-6 Green River 1455 Red Hat Road, Decatur Atlanta, Georgia 30328, USA San Antonio, Texas 78205, USA Wyoming 82935, USA Alabama 35601-7588, USA +1-770-375-2300 +1-210-453-3100 +1-307-875-2600 +1-256-301-5200 www.ocichemical.com www.ocisolarpower.com — — — — · Products: Soda ash, · Products: Solar energy · Products: Soda ash · Products: Sodium percarbonate Sodium percarbonate development and operation · 2014 Sales: KRW 489.8 billion · 2014 Sales: KRW 28.5 billion · 2014 Sales: KRW 517.5 billion · 2014 Sales: KRW 14.0 billion · OCI Ownership: 51% · OCI Ownership: 100% · OCI Ownership: 100% · OCI Ownership: 100%

15 13. OCI JAPAN CO., LTD. 14. OCI VIETNAM CO., LTD. 15. OCI CHEMICAL EUROPE N.V. 3F, Sanno Park Tower 3KM 24, DT 743 Street Cipalstraat 3, B2440 11 11-1,Nagatacho 2-chome, Chiyoda-ku Binh An Village, Di An Town Geel, Belgium 7 18 12 Tokyo 100-0014, Japan Binh Duong Province, Vietnam +32-14-570-550 8 19 13 9 10 22 20 21 +81-3-3593-0493 +84-650-375-0461 6 www.ocijapan.co.jp

4 16 3 — — — 23 17 · Products: Polysilicon and chemical · Products: Insecticides, · Services: Sales agent in Europe 14 1 2 sales, Business development Fungicides, Herbicides, · 2014 Sales: KRW 6.2 billion · 2014 Sales: KRW 1.6 billion Surfactants · OCI Ownership: 100% 5 · OCI Ownership: 100% · 2014 Sales: KRW 36.5 billion · OCI Ownership: 100%

Subsidiaries Joint Ventures

1. OCI MATERIALS CO., LTD. 2. OCI SPECIALTY CO., LTD. 3. OCI POWER CO., LTD. 4. OCI INFORMATION & 16. ORDEG CO., LTD. 17. OCI-FERRO CO., LTD. 18. SHANDONG OCI-JIANYANG 19. MA STEEL-OCI 59-33 Gaheunggongdan-ro, Yeongju-si 15 4Sandan 3-ro, Jiksan-eup Seobuk-gu 6th Fl., OCI Bldg., 94 Sogong-ro COMMUNICATION CO., LTD. 12th Fl., OCI Bldg., 94 Sogong-ro 89, Sandan-ro 67beon-gil, Danwon-gu CARBON BLACK CO., LTD. CHEMICAL CO., LTD. Gyeongsangbuk-do, 750-080, Korea Cheonan-si, Chungcheongnam-do Jung-gu, Seoul, 100-718, Korea 8th Fl., OCI Bldg., 94 Sogong-ro Jung-gu, Seoul, 100-718, Korea Ansan-si, Gyeonggi-do, 425-100, Korea Changzhuang Town, Xuecheng West side of Liqingchi Road, Economic +82-54-630-8114 331-814, Korea +82-2-727-9255 Jung-gu, Seoul, 100-718, Korea +82-2-3705-9600 +82-31-489-8800 District, Zaozhuang, Shandong, China Development Zone, Yushan District www.ocim.co.kr +82-41-580-0100 +82-2-6288-1000 www.ordeg.co.kr www.oci-ferro.co.kr +86-632-7680763 Maanshan City, Anhui Province, China www.ocispecialty.co.kr +86-555-8228239 — — — — — — — —

· Products: Nitrogen trifluoride (NF3), · Products: Slim rod (silicon filament), · Services: Solar energy · Products: Information system · Products: Automotive emission · Products: Ceramic frits, · Products: Carbon black · Products: Pitch, CBO,

Monosilane (SiH4), Tungsten Metallurgical-grade silicon (MG-Si), development and operation consulting, development, control catalysts, Environmental Zircon silicates · OCI Ownership: 51% Naphthalene & Others

hexafluoride (WF6), Disilane (Si2H6) Solar-grade ingots and wafers · 2014 Sales: KRW 4.0 billion management, and operations and industrial catalysts · 2014 Sales: KRW 27.0 billion · OCI Ownership: 60% · 2014 Sales: KRW 211.7 billion · 2014 Sales: KRW 58.6 billion · OCI Ownership: 100% · 2014 Sales: KRW 10.0 billion · 2014 Sales: KRW 335.9 billion · OCI Ownership: 50% · OCI Ownership: 49.1% · OCI Ownership: 68.2% · OCI Ownership: 100% · OCI Ownership: 20%

5. OCI SE CO., LTD. 6. OCI CHINA CO., LTD. 7. TANGSHAN OCI SUNFAR 8. SHANDONG OCI CO., LTD. 20. EKO PEROXIDE LLC 21. MISSION SOLAR ENERGY LLC 22. SUN ACTION TRACKERS LLC 23. PHILKO PEROXIDE CORP. Osikdo-dong, Gunsan-si Room 4306, CITIC Square CHEMICAL CO., LTD. No. 1 Kunlunshan Road 2622 Nashville Ferry Road 8303 S. New Braunfels Avenue 3660 Thousand Oaks Dr, Suite 316 Unit 8-1, 8th floor, Citibank Center Jeollabuk-do, 573-540, Korea No. 1168 Nanjing West Road Nanpu Economic Development Zone Chemical Park of Xuecheng Columbus, Mississippi 39701, USA San Antonio, TX 78235, USA San Antonio, TX 78247, USA 8741 Paseo de Roxas +82-63-472-6711 Shanghai 200040, China Tangshan, Hebei Province, China Zaozhuang, Shandong, China +1-800-241-6451 +1-210-531-8600 +1-210-585-8224 Makati City, Philippines +86-21-3372-2600 +86-315-733-2203 +86-632-4434-299 +63-2-889-6120 — — — — — — — — · Service: Cogeneration plant operation · Products: Polysilicon and chemical · Products: Fumed silica, HCL · Products: Pitch, CBO, · Products: Hydrogen peroxide · Products: Solar cells and modules · Products: Dual axis trackers · Products: Hydrogen peroxide, · OCI Ownership: 100% sales, Business development · 2014 Sales: RMB 19.1 million Naphthalene & Others · 2014 Sales: KRW 29.1 billion · 2014 Sales: KRW 10.2 billion · 2014 Sales: KRW 15.6 billion Other chemicals · 2014 Sales: RMB 930.3 million · Ownership: 80% · 2014 Sales: RMB 899.5 million · OCI Ownership: 50% · OCI Ownership: 66.67% · OCI Ownership: 61% · 2014 Sales: KRW 9.4 billion · OCI Ownership: 100% · OCI Ownership: 80% · OCI Ownership: 40%

44 Management & Operations OCI Annual Report 2014 45 Product list

Category Product Name Molecular Formula CAS No. Characteristics Key Applications Company Plants Basic chemical Polysilicon Si 7440-21-3 Dark-grey chips or chunks, 10-nine and 11-nine purity Key material for solar cells and semiconductor wafers OCI Gunsan, Korea

Hydrogen peroxide H2O2 7722-84-1 Colorless liquid Bleach, disinfectants OCI / OCI Alabama / Philko Peroxide Iksan, Korea / Alabama, USA / Makati City, Philippines

Sodium percarbonate 2Na2CO3:3H2O2 15630-89-4 White powder Bleach, disinfectants OCI Iksan, Korea

Fumed silica SiO2 7631-86-9 White powder, >99.8% purity Filling and reinforcing agent for sealants, rubber goods, and paints; slurry, insulation OCI / Tangshan OCI Sunfar Chemical Gunsan, Korea / Tangshan, China

High purity silicon tetrachloride SiCl4 10026-04-7 Colorless liquid Fumed silica, optical fiber, quartz OCI Gunsan, Korea

Quinclorac C10H5Cl2NO2 84087-01-4 White powder, >97.0% purity Pesticides OCI Gunsan, Korea

Quinmerac C11H8ClNO2 90717-03-6 White powder, >98.0% purity Pesticides OCI Gunsan, Korea Caustic soda, Sodium hydroxide NaOH 1310-73-2 Colorless liquid, >50%, 32.8%~33.2%, >25% purity Fiber cleaners, food seasonings, pharmaceuticals OCI Gunsan, Korea Hydrochloric acid HCl 7647-01-0 Colorless or light-yellow liquid, 35%~36% purity Wastewater treatments, catalysts, solvents OCI Gunsan, Korea Sodium hypochlorite NaOCl 7681-52-9 Greenish-yellow liquid, >12.6% purity Bleach, dyes, pigments OCI Gunsan, Korea

Phosphoric acid H3PO4 7664-38-2 Colorless liquid, 75% and 85% purity Semiconductor metal-surface finishing, additives OCI Gunsan, Korea

Soda ash, Sodium carbonate Na2CO3 497-19-8 Odorless white powder Glass, soap, detergents, food processing, textiles, paper, chemicals OCI Wyoming Green River, USA Slim rod Si 7440-21-3 Ingot of 8.3 mm diameter and 2,400 mm length, >99% purity Seed material for polysilicon manufacturing OCI Specialty Cheonan, Gongju, Korea Ingot Si 7440-21-3 Ingot of 190 mm diameter and 2,700 mm length, >99% purity Basic material for silicon wafers OCI Specialty Cheonan, Korea Wafer Si 7440-21-3 Thin slabs of silicon sliced from silicon ingots, >99% purity Solar cells OCI Specialty Gongju, Korea Silicon metal Si 7440-21-3 Grey metallic solid , >99% purity Polysilicon, organic silicon, additives for aluminum alloys Elpion Silicon Banting, Malaysia

NF3 (Nitrogen trifluoride) NF3 7783-54-2 99.999% purity Cleaning agent for semiconductor, LCD panel, and solar cell manufacturing OCI Materials Yeongju, Korea

WF6 (Tungsten hexafluoride) WF6 7803-62-5 99.9995% purity Metal contacts for chemical vapor deposition process OCI Materials Yeongju, Korea

SiH4 (Monosilane) SiH4 4109-96-0 99.9999% purity Semiconductor and TFT-LCD panel manufacturing OCI Materials Yeongju, Korea

Si2H6 (Disilane) Si2H6 1590-87-0 99.99% purity Semiconductor thin film manufacturing OCI Materials Yeongju, Korea

SiH2Cl2 (Dichlorosilane) SiH2Cl2 7783-82-6 99.9% purity Semiconductor and epitaxial silicon manufacturing OCI Materials Yeongju, Korea

BPMC (2-sec Butyl phenyl methyl carbamate, Fenobucarb) C12H17NO2 3766-81-2 Light-yellow liquid, >96% purity Carbamate insecticide for rice and cotton crops OCI Vietnam Binh Duong, Vietnam Electronic, Catalyzing, Chemical reagents 4109-96-0 OCI Incheon, Korea Pharmaceutical ingredients 1590-87-0 OCI Incheon, Korea Frit, Composition, Printing powder 7783-82-6 Granules and powder Glaze for tile and ceramics OCI Ferro Ansan, Korea Stain 7631-86-9 Powder Pigmant for tile and ceramics OCI Ferro Ansan, Korea Medium 3766-81-2 Viscous liquid Printing powder OCI Ferro Ansan, Korea Carbon chemical Carbon black C 1333-86-4 Fine carbon powder Pigment and reinforcing agent for rubbers, inks, and electrical insulation OCI Pohang, Gwangyang, Korea

3 Toluene di-isocyanate CH3C6H3(NCO)2 91-08-07 Colorless liquid, 1.22 g/cm density Polyurethane products OCI Gunsan, Korea

Naphthalene C10H8 91-20-3 Colorless solid, 95% purity Dye chemicals OCI Pohang, Gwangyang, Korea

Isoquinoline C9H7N 119-65-3 Colorless or light-yellow oil, 98% purity Polyimide film OCI Gwangyang, Korea

Indene oil C9H8 95-13-6 Light-tan oil, 50% purity Cumarone resin OCI Pohang, Gwangyang, Korea

Xylenol (CH3)2C6H3OH 1300-71-6 Colorless or light-tan oil, 80% purity Synthetic resins, solvents OCI Pohang, Korea

Quinoline C9H7N 91-22-5 Colorless or light-yellow oil, 98% purity Disinfectants, herbicides OCI Gwangyang, Korea

Cresol C7H8O 108-39-4 Colorless or light-pink oil, 70% purity Insecticides, synthetic resins, solvents OCI Pohang, Korea

Phenol C6H6O 108-95-2 Colorless or light-pink oil, 95% purity Solvents, phenolic resins OCI Pohang, Korea

Wash oil C11H10 91-57-6 Yellowish-brown oil, 30% methylnaphthalene Synthetic resins, solvents OCI Pohang, Gwangyang, Korea

Dioctyl phthalate C24H38O4 177-81-7 Colorless liquid Petrochemical feedstock OCI Pohang, Korea

Phthalic anhydride C8H4O3 85-44-9 Colorless solid Petrochemical feedstock OCI Pohang, Korea

Benzene C6H6 71-43-2 Colorless or light-yellow aromatic compound Petrochemical feedstock OCI Gwangyang, Korea

Aromatic polyester polyol (C12H12O5)n 32472-85-8 Light-brown liquid Petrochemical feedstock OCI Goedong, Korea

Mixed xylene C6H4(CH3)2 Colorless or light-yellow aromatic compound Petrochemical feedstock OCI Gwangyang, Korea

Toluene C6H5CH3 108-88-3 Colorless or light-yellow aromatic compound Petrochemical feedstock OCI Gwangyang, Korea

Naphthalene C10H8 91-20-3 Colorless solid, 95% purity Basic dyestuffs Shandong OCI Shandong, China

Wash oil C11H10 91-57-6 Yellowish-brown oil, 30% methylnaphthalene Synthetic resins, solvents Shandong OCI Shandong, China

Carbofuran C12H15NO3 1563-66-2 Light-yellow or white crystalline solid, >98% purity Carbamate insecticide for potato, corn, and soybean crops OCI Vietnam Binh Duong, Vietnam Pitch 65996-93-2 Black solid Binder for aluminum smelting OCI / Shandong OCI Pohang, Gwangyang, Korea / Shandong, China Carbon black oil 8001-58-9 Yellowish-brown oil Carbon black Shandong OCI Shandong, China Creosote 8001-58-9 Yellowish-brown oil Carbon black, wood preservatives Shandong OCI Shandong, China Decant oil 71-43-2 Highly volatile colorless liquid, 60% benzene/40% toluene Synthetic resins Shandong OCI Shandong, China Others Solar energy development and operation Solar PV plant construction, operation, and electricity sales OCI Solar Power Texas, USA N-type solar cells and modules High-efficiency solar panels Mission Solar Energy Texas, USA Solar trackers Solar PV plant construction Sun Action Trackers Texas, USA

Sapphire materials Al2O3 1344-28-1 High-purity alumina single crystal ingot LED wafer substrate OCI Jeonju, Korea Fumed silica vacuum insulation panels Ultra-high-efficiency insulation material Insulation for refrigerators, buildings, and industrial applications OCI Iksan, Korea

Automotive catalysts CO, HC and NOx emissions reduction for gasoline and diesel vehicles Ordeg Onsan, Korea Dehydrogenation catalysts Platinum catalyst for converting propane to propylene Ordeg Onsan, Korea Chloroplatinic acid crystal Feedstock for platinum compounds Ordeg Onsan, Korea Fuel-cell catalysts Catalyst for fuel cells Ordeg Ansan R&D Center, Korea

46 Management & Operations OCI Annual Report 2014 47 Independent auditors’ report English Translation of Independent Auditor’s Report Originally Issued in Korean on March 5, 2015

TO THE SHAREHOLDERS AND THE BOARD OF OCI COMPANY LTD. AND SUBSIDIARIES DIRECTORS OF OCI COMPANY LTD.: CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Deloitte Anjin LLC AS OF DECEMBER 31, 2014 AND 2013 9F., One IFC, 10, International Finance Road, Report on the Financial Statements Youngdeungpo-gu, Seoul 150-945, Korea We have audited the accompanying consolidated financial statements of OCI Company (the “Company”) Tel: +82 (2) 6676 1000 Fax: +82 (2) 6674 2114 and its subsidiaries, which comprise the consolidated statements of financial position as of December www.deloitteanjin.co.kr 31, 2014 and December 31, 2013, respectively, and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in shareholders’ equity and Korean won in thousands consolidated statements of cash flows, for the years ended, and a summary of significant accounting December 31, 2014 December 31, 2013 policies and other explanatory information. ASSETS Management’s Responsibility for the Consolidated Financial statements CURRENT ASSETS: Notice to readers Management is responsible for the preparation and fair presentation of these consolidated financial Cash and cash equivalents ￦ 518,199,191 ￦ 351,962,767 This report is effective as of March 5, 2015, statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) and for Short-term financial assets 53,368,031 222,907,944 the auditor’s report date. Certain subsequent such internal control as management determines is necessary to enable the preparation of consolidated events or circumstances may have occurred Trade and other accounts receivable 664,833,891 772,256,519 between the auditor’s report date and the financial statements that are free from material misstatement, whether due to fraud or error. Derivative assets 1,795,966 2,114,064 time the auditor’s report is read. Such events or circumstances could significantly affect Auditors’ Responsibility Assets held for sale 36,658,001 - the financial statements and may result in Our responsibility is to express an audit opinion on these financial statements based on our audit. We Inventories 552,644,073 436,469,895 modifications to the auditor’s report. conducted our audit in accordance with Korean Auditing Standards. Those standards require that we Current tax assets 5,530,935 - comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about Other current assets 53,040,814 59,157,338 whether the financial statements are free from material misstatement, whether due to fraud or error. 1,886,070,902 1,844,868,527

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the NON-CURRENT ASSETS: assessment of the risks of material misstatement of the financial statements, whether due to fraud or Long-term financial assets 13,706,384 14,001,720 error. In making those risk assessments, the auditor considers internal control relevant to the entity’s Long-term trade and other accounts receivable 6,255,583 7,074,325 preparation and fair presentation of the financial statements in order to design audit procedures that are Deferred tax assets 325,231,900 299,186,892 appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness Investments in joint entities and associates 64,302,099 88,591,428 of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting Investment property 69,747,909 76,628,010 policies used and the reasonableness of accounting estimates made by management, as well as Property, plant and equipment 4,869,033,913 4,779,269,932 evaluating the overall presentation of the financial statements. Intangible assets 144,404,358 145,627,568 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for Other non-current assets 39,960,756 47,042,249 our audit opinion. 5,532,642,902 5,457,422,124 TOTAL ASSETS ￦ 7,418,713,804 ￦ 7,302,290,651 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial Continued position of the OCI Company and its subsidiaries as of December 31, 2014 and December 31, 2013, respectively, and its financial performance and its cash flows for the years then ended in accordance with K-IFRS.

Others We conducted our audit of consolidated financial statements of OCI Company and its subsidiaries as of December 31, 2013 in accordance with the former KSAs, known as auditing standards generally accepted in Korea.

March 5, 2015

48 Financial Review OCI Annual Report 2014 49 OCI COMPANY LTD. AND SUBSIDIARIES OCI COMPANY LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED) CONSOLIDATED STATEMENTS OF INCOME AS OF DECEMBER 31, 2014 AND 2013 FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

Korean won in thousands Korean won in thousands, except for income per share data

December 31, 2014 December 31, 2013 2014 2013

LIABILITIES CURRENT LIABILITIES: Sales ￦ 3,139,651,588 ￦ 2,955,507,111 Short-term financial liabilities ￦ 979,613,531 ￦ 643,108,094 Cost of sales (2,652,355,342) (2,704,710,060) Trade and other accounts payable 824,166,882 801,093,173 Gross profit 487,296,246 250,797,051 Derivative liabilities 5,391,643 4,119,199 Current tax liabilities 7,447,947 123,387,779 Selling and administrative expenses (441,395,678) (356,997,041) Liabilities related to assets held for sale 2,938,779 - Other current liabilities 2,943,333 8,409,139 Operating income (loss) 45,900,568 (106,199,990) 1,822,502,115 1,580,117,384 Financial income 92,110,821 107,755,631 NON-CURRENT LIABILITIES: Financial expense (179,276,627) (165,068,279) Long-term financial liabilities 1,758,648,979 1,732,446,824 Share of profits of joint entities and associates 7,135,683 8,907,175 Long-term trade and other accounts payable 33,986,649 39,579,992 Other non-operating income 137,187,210 81,779,755 Derivative liabilities - 240,984 Other non-operating expense (53,865,097) (110,216,800) Provisions 6,968,239 25,985,151 Retirement benefit obligations 124,130,085 79,823,972 Income (loss) before income tax expense 49,192,558 (183,042,508) Other non-current liabilities 416,990,314 570,794,989 2,340,724,266 2,448,871,912 Income tax expense (6,857,858) (104,734,754) TOTAL LIABILITIES 4,163,226,381 4,028,989,296 Net income (loss) ￦ 42,334,700 ￦ (287,777,262) SHAREHOLDERS’ EQUITY SHAREHOLDERS’ EQUITY: NET INCOME (LOSS) ATTRIBUTABLE TO: Capital 127,246,855 127,246,855 Owners of the Company ￦ (19,913,722) ￦ (327,715,806) Other contributed capital 789,851,475 799,504,769 Non-controlling interests ￦ 62,248,422 ￦ 39,938,544 Other components of capital (14,169,208) (29,311,563) Retained earnings 1,883,748,484 1,935,055,439 Net loss per share (in Korean won) 2,786,677,606 2,832,495,500 Basic and diluted loss per share ￦ (835) ￦ (13,741)

NON-CONTROLLING INTERESTS 468,809,817 440,805,855 TOTAL SHAREHOLDERS’ EQUITY 3,255,487,423 3,273,301,355 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY ￦ 7,418,713,804 ￦ 7,302,290,651

50 Financial Review OCI Annual Report 2014 51 OCI COMPANY LTD. AND SUBSIDIARIES OCI COMPANY LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

Korean won in thousands Korean won in thousands

2014 2013 Other Other Non- Total contributed components Retained Owners of controlling shareholders’ Capital capital of capital earnings the Company interests equity NET INCOME (LOSS) ￦ 42,334,700 ￦ (287,777,262) January 1, 2013 ￦ 127,246,855 ￦ 800,944,104 ￦ 1,292,776 ￦ 2,244,235,963 ￦ 3,173,719,698 ￦ 417,913,539 ￦ 3,591,633,237 OTHER COMPREHENSIVE INCOME (LOSS): Dividends (9,539,748) (9,539,748) (97,387,891) (106,927,639) Items that will not be reclassified subsequently to income (loss): (32,525,933) 28,385,398 Net income (loss) (327,715,806) (327,715,806) 39,938,544 (287,777,262) Remeasurement factor on defined benefit plans (32,525,933) 28,385,398 Paid-in capital increase - 92,604,056 92,604,056 Items that may be reclassified subsequently to income (loss): 20,031,056 (31,792,619) Capital transactions with non-controlling interests (1,287,923) (1,287,923) (43,601,293) (44,889,216) Loss on valuation of AFS financial assets (685,783) (18,107,989) Change in consolidation scope - 32,275,337 32,275,337 Share of other comprehensive income of jointly controlled entities and associates 1,061,703 183,736 Loss on valuation of AFS financial assets (18,107,989) (18,107,989) (18,107,989) Gain (loss) on overseas operations translation 18,498,720 (15,237,701) Jointly controlled entities and associates 183,736 183,736 183,736 Gain on valuation of derivative instruments 1,160,583 1,369,335 Translation loss on overseas operations (13,947,875) (13,947,875) (1,289,826) (15,237,701) Other comprehensive loss (4,167) - Gain on valuation of derivatives 1,267,789 1,267,789 101,546 1,369,335 (12,494,877) (3,407,221) Remeasurement factor on defined benefit plans 28,133,555 28,133,555 251,843 28,385,398 Others (151,412) (58,525) (209,937) (209,937) COMPREHENSIVE INCOME (LOSS) ￦ 29,839,823 ￦ (291,184,483) December 31, 2013 ￦ 127,246,855 ￦ 799,504,769 ￦ (29,311,563) ￦ 1,935,055,439 ￦ 2,832,495,500 ￦ 440,805,855 ￦ 3,273,301,355

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

Owners of the Company ￦ (41,255,741) ￦ (330,186,590) Korean won in thousands Non-controlling interests ￦ 71,095,564 ￦ 39,002,107 Other Other Non- Total contributed components Retained Owners of controlling shareholders’ Capital capital of capital earnings the Company interests equity

January 1, 2014 ￦ 127,246,855 ￦ 799,504,769 ￦ (29,311,563) ￦ 1,935,055,439 ￦ 2,832,495,500 ￦ 440,805,855 ￦ 3,273,301,355 Dividends - (58,804,467) (58,804,467) Net income (loss) (19,913,722) (19,913,722) 62,248,422 42,334,700 Paid-in capital increase (311,644) (311,644) 17,026,451 16,714,807 Capital transactions with non-controlling interests (3,867,754) (3,867,754) (1,313,586) (5,181,340) Loss on valuation of AFS financial assets (685,783) (685,783) (685,783) Jointly controlled entities and associates 1,057,378 1,057,378 4,325 1,061,703 Translation gain on overseas operations (5,473,896) 13,576,460 8,102,564 10,396,156 18,498,720 Gain (loss) on valuation of derivatives 1,198,467 1,198,467 (37,884) 1,160,583 Remeasurement factor on defined benefit plans (31,010,478) (31,010,478) (1,515,455) (32,525,933) Others (4,167) (382,755) (386,922) (386,922)

December 31, 2014 ￦ 127,246,855 ￦ 789,851,475 ￦ (14,169,208) ￦ 1,883,748,484 ￦ 2,786,677,606 ￦ 468,809,817 ￦ 3,255,487,423

52 Financial Review OCI Annual Report 2014 53 OCI COMPANY LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

Korean won in thousands Korean won in thousands

2014 2013 2014 2013

CASH FLOWS FROM OPERATING ACTIVITIES: CASH FLOWS FROM FINANCING ACTIVITIES: Cash generated from operating activities ￦ 380,855,067 ￦ 327,304,927 Increase in short-term borrowings 516,982,869 181,493,915 Interest income received 13,828,053 16,759,127 Decrease in short-term borrowings (432,828,250) (217,616,139) Interest expense paid (107,869,121) (91,759,066) Decrease in current portions of long-term financial liabilities (388,810,407) (91,720,943) Dividends income received 6,615,677 9,774,525 Increase in long-term borrowings 688,935,888 188,216,919 Income taxes paid (122,306,683) (233,939,627) Decrease in long-term borrowings (28,962,246) (21,057,682) Net cash provided by operating activities 171,122,993 28,139,886 Issuance of long-term debentures 29,909,700 139,699,500 Increase in government subsidies 3,778,531 10,389,866 CASH FLOWS FROM INVESTING ACTIVITIES: Paid-in capital increase 11,727,747 92,804,057 Decrease in short-term financial instruments 471,500,000 1,470,400,000 Payment of dividends (59,157,057) (106,112,556) Increase in short-term financial instruments (301,242,827) (1,370,768,854) Acquisition of non-controlling interests (1,496,000) (44,889,215) Decrease in short-term loans 3,060,499 10,035 Equity transaction with non-controlling interests (3,685,340) - Increase in short-term loans (10,000) (1,225,500) Others (330,620) (152,449) Decrease in HTM financial investments 1,240,225 883,905 Net cash provided by financing activities 336,064,815 131,055,273 Increase in HTM financial investments (78,920) (117,165) Decrease in AFS financial assets - 40,605,781 CHANGES IN CASH AND CASH EQUIVALENTS DUE TO FOREIGN CURRENCY TRANSLATION 2,127,722 (1,252,540) Increase in long-term financial instruments (1,053,445) (36,348) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 166,236,424 (94,328,888) Decrease in long-term loans 644,046 4,318,827 CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 351,962,767 446,291,655 Increase in long-term loans (330,833) (248,750) CASH AND CASH EQUIVALENTS, END OF THE YEAR ￦ 518,199,191 ￦ 351,962,767 Disposal of investment property 27,574,177 - Acquisition of investment property (274,150) - Disposal of property, plant and equipment 13,189,277 7,597,745 Acquisition of property, plant and equipment (697,843,100) (418,653,254) Disposal of intangible assets 2,072,389 3,410,578 Acquisition of intangible assets (5,161,674) (5,394,778) Disposal of joint venture investment assets 93,759,058 - Acquisition of joint ventures and associates (144,800) (4,431,605) Decrease in other non-current assets 5,376,595 - Increase in other non-current assets - (3,285,444) Cash inflow from acquisition of subsidiaries - 24,663,320 Cash inflow from disposal of subsidiaries 44,644,377 - Net cash used in investment activities ￦ (343,079,106) ￦ (252,271,507)

Continued

54 Financial Review OCI Annual Report 2014 55 Corporate info and contacts

Date of establishment November 8, 1959

Head office OCI Building, 94 Sogong-ro, Jung-gu, Seoul, 100-718, Korea +82-2-727-9500

Website www.oci.co.kr

Stock information The stock was listed on the Korea Exchange in 1976. Paid-in capital | USD 115.8 million Based on KRW-USD exchange rate of 1,099.20 as of Dec. 31, 2014 Common stock | 23,849,371 shares

IR contact point email | [email protected] OCI Company Co., Ltd. OCI Building, 94 Sogong-ro, Jung-gu, Seoul, 100-718, Korea +82-2-727-9500