CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION Annual Report ОМК 2018 OMK ANNUAL REPORT 2018 1 CONTENTCONTENTSS OVERVIEWOVERVIEW STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION About THE Annual Report The OMK Annual Report for 2018 includes the company’s results during the reporting period, from 1 January 2018 to 31 December 2018. Operating results in the OMK Annual Report consolidated according to intracorporate order. OMK sustainable development results and actions are presented in accordance with GRI standards. The corporate social responsibility committee approved the OMK Annual Report 2018 on May 27, 2019. OMK ANNUAL REPORT 2018 2 [ CONTENTSCONTENT S ] OVERVIEWOVERVIEW STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION CONTENTS 1.0 Overview 4.0 Operating results 1.1 About the company 4.1 Message from the Chair 1.2 Major pipeline projects of the Management Board 1.3 Geographical reach 4.2 Operating indicators 1.4 Annual results 1.5 Message from the Chairman 5.0 Sustainable development report of the Board of Directors 5.1 Message from a Member of 1.6 Main events in 2018 the Management Board, Head of the Human Resources Department 2.0 Strategy 5.2 Sustainable development practices 2.1 Mission 5.3 HR Management 2.2 Vision 5.4 Production safety 2.3 Areas for development 5.5 Environmental safety 2.4 Strategy implementation 5.6 Quality management 2.5 Collaborations 5.7 Responsible procurement 2.6 Investments 5.8 Social projects 2.7 R&D 5.9 Charity 2.8 Market overview 5.10 Conclusion 5.11 Internal audit review 3.0 Corporate governance 3.1 Approach to corporate governance Appendices 3.2 Management structure A Corporate social responsibility goals 3.3 Board of Directors B GRI Standards Index 3.4 Management Board 3.5 Management Board activity 6.0 Contacts OMK ANNUAL REPORT 2018 3 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.0 Overview OMK ANNUAL REPORT 2018 4 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.1 ABOUT THE COMPANY OMK is an integrated high-tech producer of steel, rolled sheet, pipes, pipeline valves and fittings, railway wheels, and automotive springs. Our products enable safe and efficient transportation of freight and passengers THE GROUP CONSISTS OF FIVE LARGE 1 2 3 4 5 VYksa BLAGOVESHCHENSK TRUBODetaL ALMETYEVSK CHUSOVOY STEEL VALVES PLANT PLANT PIPE PLANT STEEL Works Works (Vyksa, Nizhny Novgorod (Blagoveshchensk, (Chelyabinsk, (Almetyevsk, (Chusovoy, region) Republic of Baskortostan) Chelyabinsk region) Republic of Tatarstan) Perm Territory) OMK ANNUAL REPORT 2018 5 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION VYksa STEEL Моscow works Vyksa R U S S I A BLagovesHCHensk vaLVE PLANT TRUBODetaL Almetyevsk FaciLitY Chusovoy Blagoveshchensk ALMETYEVSK Chelyabinsk PIPE PLANT* CHUsovoY mataLLURGICAL works *app or atz OMK ANNUAL REPORT 2018 6 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.1 ABOUT THE COMPANY OMK’S BUSINESS CONSISTS OF SEVEN DIVISIONS Large DIAMETER OIL AND GAS APP PIPES DIVISION, PIPES DIVISION, DIVISION, Vyksa Vyksa Almetyevsk Thick-Plate Mill 5000 Casting and rolling mill — Almetyevsk Pipe Plant — (Mill 5000) — producing producing hot rolled sheet producing oil and gas pipes, hot-rolled thick sheet water and gas pipes VSW Electric Pipe Welding Shop and shaped pipes VSW Electric Pipe Welding No. 2 — producing water and gas Shop No. 4 — producing pipes and small sections large diameter pipes VSW Electric Pipe Welding Shop Pipe Anti-Corrosion No. 3 — producing oil and gas pipes Coating Shop and large sections VSW Electric Pipe Welding 1 Shop No. 5 — producing2 3 casing pipes Casing Pipe Finishing Centre OMK ANNUAL REPORT 2018 7 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.1 ABOUT THE COMPANY OMK’S BUSINESS CONSISTS OF SEVEN DIVISIONS TRUBODetaL BVP RAILwaY CSW DIVISION, DIVISION, WHEELS DIVISION, DIVISION, Chelyabinsk 4Blagoveshchensk5Vyksa 6Chusovoy 7 Chusovoy Steel Works — Trubodetal Plant — Blagoveshchensk Valves VSW Wheel Plant — producing automotive springs producing pipe fittings Plant — producing pipeline producing railway wheels valves OMK ANNUAL REPORT 2018 8 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.1 ABOUT THE COMPANY RUSSIAN MARKET POSITION AND SHARЕ 1 1 POSITION 2 POSITION 3 POSITION RAILwaY % Water AND % SHAPED % 1WHEELS2 57 2GAS PIPES 12 3PIPES 9 AUTOMOTIVE % TotaL TUBULAR % PIPELINE % SPRINGS 56 PRODUCTS 16 vaLVES3 12 Large DIAMETER % PIPELINE % PIPES 22 fittings 13 1 Market share in quantitative terms, based on production volume of this type of product (estimated) CASING % OIL AND % 2 On the 1520 sector PIPES GAS PIPES 3 In operating segments 23 14 OMK ANNUAL REPORT 2018 9 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.2 MAJor pipeline proJects OMK pipes are used in the construction DELIVERIES IN 2018: NORD STREAM 2 | TURKISH STREAM | of major oil and gas pipelines NUROS - ABU-MADI - EL GAMIL, EGYPT | KASIMOVSKIY PHG PIPELINE | MOZDOK-GROZNYI | (total volumes supplied since 2007). NORTH EUROPEAN GAS PIPELINE 680 NORD STREAM 2 495 SOUTH CORRIDOR thousands thousands of tonnes of tonnes 620 Bovanenkovo - Ukhta 480 Ukhta - TORZHOK thousands thousands of tonnes of tonnes EASTERN SIBERIA - 570 PACIFIC OCEAN 470 NORD STREAM thousands thousands of tonnes of tonnes 530 POWER OF SIBERIA 370 CENTRAL ASIA — CHINA thousands thousands of tonnes of tonnes NORTH EUROPEAN SAKHALIN — KHABAROVSK — 530 GAS PIPELINE 340 VLADIVOSTOK thousands thousands of tonnes of tonnes 450 TURKISH STREAM thousands of tonnes OMK ANNUAL REPORT 2018 10 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.3 GeograpHical ReacH WHILE THE majoritY OF OMK PRODUCTS ARE SOLD IN RUSSIA, THE companY IS ACTIVE ON THE internationaL MARKET. PRODUCTS WERE SUPPLIED TO MORE THAN 20 COUNTRIES IN 2018. Azerbaijan Moldova Armenia Netherlands Belarus Poland Bulgaria Slovakia United Kingdom USA Hungary Uzbekistan Germany Ukraine Guinea Turkey Egypt Finland Italy France Kazakhstan Czech Republic Kyrgyzstan Estonia Latvia Japan Lithuania OMK ANNUAL REPORT 2018 11 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.4 Annual Results PRODUCTION % % 1983 -11 TUBULAR PRODUCTS 860 +26 RAILwaY WHEELS thousands thousand of tonnes units % Large DIAMETER % PIPELINE 772 -25 PIPES 13 +30 fittings thousands thousands of tonnes of tonnes % PIPELINE 550 -17 WIDE SHEET 4,9 = vaLVES thousands thousands of tonnes of tonnes % % AUTOMOTIVE 1275 +1 ROLLED PRODUCTS 44 -1 SPRINGS thousands thousands of tonnes (ROLLS AND SHEETS) of tonnes SOCIAL RESPONSIBILITY * % SHARE OF ENGAGED Lost TIME INJURY 65 EMPLOYEES 1,29 FREQUENCY rate, (LTIFR) awards FOR EMPLOYEES** SOCIAL AND CHARITY PROJECTS 199 740 Rub. Million * Hereinafter - special marks on the implementation of the 2018 goals ** Departmental, regional, municipal awards to employees in the field of corporate social responsibility of the company OMK ANNUAL REPORT 2018 12 CONTENTCONTENTSS [ OVERVIEW OVERVIE W ] STRATEGYSTRATEGY MANAGEMENTMANAGEMENT KEY INDICATORSINDICATORS SUSTAINABLE DEVELOPMENTDEVELOPMENT CONTACT INFORMATIONINFORMATION 1.5 MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS DEAR COLLEAGUES AND PARTNERS, Thirdly, we have been exploring new, in-demand products with high potential to expand the packages we offer. This year, I am proud to present the United Metallurgical Company’s we brought modular equipment, unique pipeline fittings, and annual report. 2018 was a fairly challenging year. OMK several special kinds of casing and railway wheels to market reached high levels of operational performance and laid a firm for the first time, as well as delivering innovative ball valves. foundation for further growth, all in a context of increased competition across all sectors of our business and other In addition to developing production, this reporting year, OMK external factors. was actively involved in improving the quality of life in regions where we have a presence and in creating a comfortable I would like to convey my sincere thanks to all the company’s environment for our employees and their families, in line with employees for their efficiency, their commitment to growth, and our principles of corporate social responsibility. Our programs their support for our one-of-a-kind corporate culture. I would help thousands of people from Vyksa to Chusovoy. also like to thank local, regional, and federal officials