DECLARATION UNDER THE INTERNATIONAL PRINCIPLE OF "COMPLY OR EXPLAIN"

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KARBONAT JSC (hereinafter referred to as the company) voluntarily follows the recommendations of the Corporate Governance Code (hereinafter referred to as the Code) approved by Minutes of the meeting of the Commission on Improvement of Joint Stock Companies' Performance and Corporate Governance System dated 31.12.2015 No. 9, demonstrating its commitment to honest and transparent business conduct.

In accordance with Article 11 of the Codex, where it is not possible to comply with certain recommendations of the Code, the company shall disclose the reasons in detail, following the international principle of 'comply or explain'.

Codex Recommendations Explanation

Paragraph 4 of Article 15 of the Codex:

carry out, by decision of the General Meeting of Shareholders, an annual review of the compliance of business processes and projects with the JSC's development objectives, involving independent professional organisations - consultants.

The issue of engaging independent professional organisations - consultants to conduct annual reviews of the relevance of business processes and projects to development objectives needs to be carefully considered.

Paragraph 15 of Article 20 of the Codex:

ensure that members of the executive body, supervisory board and audit committee, as well as a representative of the auditing organisation, attend the annual general meeting of shareholders.

The company will make arrangements for the participation of members of the executive body, the supervisory board and the auditing committee, as well as a representative of the auditing organisation, at the annual general meeting of shareholders.

Paragraph 5 of Article 25 of the Codex:

establish committees (working groups) on relevant issues, including for identifying and resolving conflict situations, consisting of members of the supervisory board, the executive body, JSC personnel and involved experts (specialists in the relevant field, teaching staff of specialized higher education institutions and others) under the JSC's supervisory board.

The company will make steps to establish an audit committee and other committees as necessary.

Paragraph 11 of Article 25 of the Codex:

insure the business risks of the JSC and the liability of the executive body.

Business risk and executive liability insurance services are not available among the services of insurance companies. In the future, when such types of insurance are provided, the company will make arrangements for appropriate insurance.

Paragraph 3 of Article 29 of the Codex:

regular assessments of the conformity of the JSC's current organisational structure with the model structure approved by law shall be organised.

The company will take measures in the future to organise regular assessments of compliance of the current organisational structure of the company with the model structure approved by law.
Other non-compliant recommendations The company will take action to ensure compliance with the recommendations in the future, should the possibility of compliance arise.