EnclosureNo.____ to minutes of board of directors «KazMunayGas»NC JSC Dated «__» «______________» 2015 minuteNo. ____ Annual report of “KazMunayGas – Refinery and Marketing” Joint-Stock Company for 2014 Astana – 2015 1 CONTENTS Notes 3 1. ABOUT THE COMPANY 3 1.1 History of the company establishment 3 1.2 Mission 3 1.3. Vision 1.4 Performance overview 3 1.5 Strategic goals 4 1.6 Key activities 4 2. CORPORATE GOVERNANCE 5 2.1 Members of board of directors of KMG-RM 8 2.2 Members of management board of KMG-RM 9 11 3. AIMS AND GOALS OF JSC “KAZMUNAYGAS – RM” STRATEGY FOR PERIOD OF 2014-2022 12 3.1. Consolidated financial and economic indicators of JSC ―KazMunayGas – RM‖ according 14 to the results of 2014 15 3.2. Key events in 2014 17 3.3. Capital structure of JSC ―KazMunayGas – RM‖ 19 4. KEY RESULTS OF FINANCIAL AND OPERATING ACTIVITIES 4.1Financial results for 2012-2014 4.2Oil refining 4.3 Competitive benchmarking of company's activity over the past period 4.4 Investment projects for development of Oil refinery 4.5Sales of oil products 25 4.6 Export and transportation 27 5. SUSTAINABLE DEVELOPMENT 28 5.1. Personnel 29 5.2. Sponsorship and charity 30 5.3. Environmental security 30 5.4. Occupational safety and health 32 Governance structure (as of December 31, 2014) 33 6. CORPORATE GOVERNANCE (continuation) 34 6.1. Criteria for selection of Members of board of directors and management board 38 6.2. Shareholders’ equity 39 Plans of JSC ―KazMunayGas – RM‖ for the 2015 39 7. RISK MANAGEMENT 39 8. CONSOLIDATED FINANCIAL STATEMENTS 42 Appendix 1. List of material transactions and transactions with related parties 50 Contact information 54 2 NOTES Terms «KazMunayGas – RM» JSC, KazMunayGas - RM, KMG-RM, the Company in the annual report refer to the parent company of KMG RM Group –«KazMunayGas – Refining and Marketing» Joint Stock Company. The KMG – RM Group means a Group of Companies consisting of JSC KazMunayGas – Refining and Marketing and its subsidiaries and related entities. Terms «KazMunayGas» NC JSC, the Sole shareholderand NC KMG refer to the Joint Stock Company ―National company KazMunayGas‖. Accordingly, the term KazMunayGas Group means «KazMunayGas» NC JSC and its subsidiaries. The term ―downstream‖ means activities associated with processing and marketing of hydrocarbons. ABOUT THE COMPANY History of the company establishment In 2002, Trade House ―KazMunayGas‖ Limited Liability Partnership – subsidiary of Joint Stock Company ―National Company KazMunayGas‖, which was soon reorganized into a closed Joint Stock Company and later into a Joint Stock Company, was established to organize and carry out transportation and trading of oil and its derivatives in the Republic of Kazakhstan and abroad. In 2010, Joint Stock Company Trade House ―KazMunayGas‖ was renamed into Joint Stock Company ―KazMunayGas – Refining and Marketing‖. Mission Development as a competitive, high performance innovation and technological downstream company; Ensuring of oil refiningcapacity and production of high-quality oil products Stabilization of domestic oil products market of the Republic of Kazakhstan by means of marketing of oil products through the extensive marketing channels. Vision JSC KazMunayGas – RM a high performance innovation and technological downstream unit of JSC NC KazMunayGas, who holds streamlined oil refining assets and extensive channels for the marketing of oil products, Kasakhstan's leader in the field of refining and sales of oil products. Performance overview: Oil refining and production of oil products; Marketing of oil products; Innovation and technological development; Corporate managenment; Social responsibility. Strategic goals: Increase in oil refining capacity and efficiency, and quality of output; 3 Bringing oil refinery's business process management to the level of leading peers in the industry; Achieving stabilizing share in the oil products retail market of 32% by 2022; Maintenance of quality and stability in supplying of oil products to KMG-RM group; Development of extensive channels for oil products marketing; Improvement of innovative and technological development management system; Improvement of operational processes efficiency through the introduction and implementation of new technologies and new manufacturing plants; Improvement of efficiency of KMG-RM group corporate governance; Regulation of social-labor relationships on the basis of social partnership; Improvement of personnel policy and human resource development; Ensuring of safety in the workplace and reduction of environmental risks. Key activities: Management of oil refining assets in Kazakhstan; Analysis and forecast of changes in overall environment in the global and domestic market of oil, gas, and their derivatives; Participation in the development and implementation of state and industry programs for oil and gas sector development; Carrying out export and import of oil products and other goods (works, services); Wholesale and retail sales of oilproducts, gas (including lubricating oils and fuel and lubrication materials), and other goods (works, services); sales of compressed natural (dry) gas and liquefied gas (LNG), propellant, pentane-hexane fraction (PHF); Operation of compressors, boilers, pipelines and gas pipelines under pressure; Сonstruction and assembling operations on gasification of settlements and commissioning of gasoline service stations; Construction, maintenance, operation and repair of petrol filling stations (PFS), oil depots and gas filling stations (GFS), natural gas vehicles refueling compressor stations (NGVRCS), gas- filling points (GFP), intermediate depots of gas bottles (IGBD), group tank units (GTU), stationary and mobileautomatic gas refueling stations (AGRS); AGRS, road tank cars and motor vehicles refueling with compressed and liquefied gas, as well as with motor fuel. 4 CORPORATE GOVERNANCE Members of Board of directors of KMG-RM (as of December 31, 2014): Syrgabekova Assiya Narimanovna Chairman of the Board of Directors — Born June 22, 1960 in Karaganda oblast — Managing director for economy and finance at NC «KazMunayGas» JSC — Deputy General Director for economy and finance at «KazTransGas» CJSC — 1st Deputy General Director at «Intergas Central Asia» CJSC — 1st Deputy Chairman of Board, Chairman of Board at «Halyk Bank of Kazakhstan» JSC — Managing director for economy and finance at NC «KazMunayGas» JSC — Financial director at NC «KazMunayGas» JSC — Member of the Board of Directors at EP «KazMunayGas» JSC — 2013 – to present – Managing director for investment and risk management at NC «KazMunayGas» JSC Tiyessov Daniyar Suinshilikovich General Director (Chairman of Board)of JSC «KazMunayGas – RM» — Born December 6, 1970 in the city of Tselinograd — Deputy director of department of NC«KazMunayGas»CJSC petroleum chemistry development — Financial director at «ATYRAU REFINERY» LLP — Head of capital construction department at «ATYRAU REFINERY» LLP — Deputy General Director for production at «TH «KazMunayGas» JSC, «KazMunayGas Onimderi» JSC — Managing director for refinery and marketing at NC «KazMunayGas» JSC — Deputy Chairman of the Board at NC«KazMunayGas» JSC for refinery and petroleum chemistry — At the present – General director (Chairman of the Board) at «KazMunayGas-refinery and marketing» JSC. Also – Deputy Chairman of the Board for refinery and oil marketing at NC «KazMunayGas» JSC Abduov Nurlan Kanatovich Member of the Board of Directors — Born February 3, 1977 in the city of Almaty — Vice-president at Union of Chamber of Commerce and Industry — General director at «GazImpeks» CJSC — General director at «KazStroyServis» CJSC — General director, consequently chairman of board at SAT & Company — Chairman of the Board of Directors at «Kazakhstan PetroChemical Industries» JSC — Member of the Board of Directors, independent director at «Intergaz Central Asia» JSC — At the present — Chairman of the Presidium of the Kazakh Geographic Society Okayev Yerkebulan Kabievich Member of the Board of Directors — Born June 10, 1970 in the city of Almaty — Chairman of Board at «Kazakhstan Investment Bank» OJSC — General director at«New way investmet» LLP — Member of Board, 1st deputy Chairman of Board at «Eurasian Bank» JSC — Member of Supervisory Board at «Allur Auto» LLP — Independent member of the Board of Directors at«Troika Dialog Kazakhstan» JSC — Independent director at «KazMunayGas Onimderi» JSC — At the present member of the Board, first deputy chairman of the board of «Eurasian Bank» JSC. Tanatarova Shara Bakytzhanovna Member of the Board of Directors — Born on November 30, 1978 in Zhana-Ozen of Mangistau region — Chief specialist of department of corporate finance, manager of department of corporate finance, chief manager of department of corporate finance, 1st category m of department of corporate finance at NC «KazMunayGas» JSC — Director of department of corporate finance, managing director of «KazMunayGas – refinery and marketing» JSC — Director of corporate finance and asset management, NC «KazMunayGas» JSC — At the present director of asset management department of NC «KazMunayGas» JSC. 5 Members of management board of KMG-RM (as of December 31, 2014): Tiyessov Daniyar Suinshilikovich General Director (Chairman of Board)of «KazMunayGas – RM»JSC – Born December 6, 1970 in the city of Tselinograd – Deputy director of department of NC«KazMunayGas»CJSC petroleum chemistry development – Financial director at «ATYRAU REFINERY» LLP – Head of capital construction department at «ATYRAU