On the ratification of the Loan Agreement (Nura River Cleanup Project) between the Republic of Kazakhstan and the International Bank for Reconstruction and Development

Home / RLA / On the ratification of the Loan Agreement (Nura River Cleanup Project) between the Republic of Kazakhstan and the International Bank for Reconstruction and Development

Law of the Republic of Kazakhstan dated May 26, 2004 No. 556

To ratify the Loan Agreement (Nura River Cleanup Project) between the Republic of Kazakhstan and the International Bank for Reconstruction and Development, signed in Washington on December 17, 2003.

President of the Republic of Kazakhstan

Loan agreement

(Nura River Purification Project)

between the Republic of Kazakhstan and

By the International Bank for Reconstruction and Development

Date December 17, 2003

Loan number 4693 KZ

Loan agreement

Agreement dated December 17, 2003 between the Republic of Kazakhstan (the Borrower) and the International Bank for Reconstruction and Development (the Bank). Whereas, the Borrower, having verified the feasibility and priority of the Project described in Appendix 2 to this Agreement (Project), requested the Bank to assist in financing this Project; Whereas the Bank has agreed, in particular on the basis of the above, to provide the Borrower with a Loan on the terms and for the period provided for in this Agreement; the parties hereby agree as follows:

Article I General conditions; Definitions.

Section 1.01. "General Terms and Conditions Applicable to Single Currency Loans and Guarantees Agreements" of the Bank dated May 30, 1995, as amended until October 6, 1999 (General Terms and Conditions) are an integral part of this Agreement.

Section 1.02. Unless the context otherwise requires, some terms defined in the General Terms and Conditions have the meanings that correspond to those specified in these definitions, and additional terms have the following meanings: (a) "KVR" - Committee on Water Resources of the Ministry of Agriculture of the Borrower. (b) "EMP" is an Environmental Management Plan that satisfies the Bank, prepared and adopted by the Borrower on February 22, 2002, which describes measures to mitigate environmental impacts, monitoring and institutional measures within the framework of the Project. (c) "Financial Monitoring Report" means each report prepared in accordance with Section 4.02 of this Agreement. (d) "ITU" is an International Council of Experts consisting of at least three international experts in the relevant fields of mercury toxicology and purification, established and maintained by the Borrower in accordance with paragraph 3 (c) of Annex 1 to this Agreement. (e) "Implementation Guide" - a guide prepared by the State Unitary Enterprise and submitted to the Bank on January 13, 2003, which specifies the procedures for administration, development, procurement, reporting and monitoring within the framework of the Project. (e) "PRP" - The Project Implementation Plan. (g) "GUP" is the Project Management Group of the Committee on Water Resources, which is fully responsible for the preparation, implementation and coordination of activities within the framework of the Project. (h) "Special Account" means an account opened in accordance with Section 2.02 (b) of this Agreement.

Section 1.03. All references in the General Terms and Conditions to the project implementation body are considered as references to the Committee on Water Resources.

Article II Loan

Section 2.01. The Bank agrees to provide the Borrower with an amount equal to forty million three hundred and ninety thousand US dollars (40,390,000 US dollars) for the term and conditions set forth or specified in this Agreement.

Section 2.02. (a) In accordance with the provisions of Appendix 1 to this Agreement, the Loan amount may be withdrawn from the Loan Account for the amount paid (or, if the Bank agrees, payable) By the Borrower for the purchase at similar prices of goods and services necessary for the Project and provided for financing from the Loan funds and in respect of the payment specified in Section 2.04 of this Agreement. (b) For the purposes of the Project, the Borrower may open and maintain a special dollar deposit account with a bank acceptable to the Bank and on terms acceptable to the Bank, including adequate protection of funds from counter-claims, confiscation or seizure. Deposits to a Special Account and payments from this account are made in accordance with the provisions of Annex 6 to this Agreement.

Section 2.03. The closing date of the Project is September 30, 2009 or such later date as the Bank determines. The Bank shall immediately notify the Borrower of such a later date.

Section 2.04. The Borrower pays the Bank a commission for arranging the loan in the amount of one percent (1%) of the Loan amount. On or immediately after the Effective Date of this Agreement, the Bank, on behalf of the Borrower, withdraws from the Loan Account and pays the commission amount in its favor.

Section 2.05. The Borrower pays the Bank a commission for the obligation on the principal amount of the Loan, which has not been withdrawn from the Loan Account from time to time, at a rate of three quarters of one percent (3/4 of 1%) per annum.

Section 2.06. (a) The Borrower pays interest on the withdrawn and from time to time outstanding principal amount of the Loan at a rate equal to the Base LIBOR Rate plus the total LIBOR spread for each interest accrual period. (b) For the purposes of this section: (i) "Interest Accrual Period" means the beginning of the interest accrual period from the date of conclusion of this Agreement, including that date, but excluding the first interest payment date following it, and after the initial period, each period starting from and including the Interest Payment Date, but excluding the Interest Payment Date following it. (ii) "Interest Payment Date" is the date specified in Section 2.07 of this Agreement. (iii) The "LIBOR Base Rate" is the rate of supply on the London interbank market for six-month dollar deposits, estimated on the first day of the Interest Accrual Period for each Interest accrual period (or, in the case of the initial Accrual Period, estimated on the Date of the Interest Payment, either on the day of such Interest Accrual Period, or on the day preceding on the first day of interest accruals), which is reasonably determined by the Bank and expressed as a percentage per annum. (iv) "Total LIBOR spread" - for each Interest Accrual Period: (a) three quarters of one percent (3/4 of 1%); (b) minus (or plus) the weighted average margin for each Interest Accrual Period, below (or above) The London Interbank Offer Rate or other indicative rates for six-month deposits in respect of the Bank's outstanding borrowed funds or portions of borrowed funds allocated by the Bank to finance single-currency loans or portions of loans that are reasonably determined by the Bank and expressed as a percentage per annum. (c) The Bank shall immediately notify the Borrower of the LIBOR base rate and the total LIBOR spread, which are determined for each interest accrual period. (d) If, due to changes in market conditions that affect the determination of interest rates specified in Section 2.06, the Bank determines that, in the interests of its borrowers in general and the Bank in particular, it is necessary to apply a different basis for determining interest rates on a Loan than specified in the aforementioned section, the Bank may to change the base for determining interest rates on a Loan, upon notifying the Borrower at least six (6) months in advance of such a new base. The base rate becomes effective after the expiration of the notification period, except in cases when the Borrower notifies the Bank of his objection during the specified period, in which case the specified changes should not apply to the Loan.

Section 2.07. Interest and other fees are payable every six months with a delay of April 15th and October 15th of each year.

Section 2.08. The Borrower repays the principal amount of the Loan in accordance with the repayment schedule set out in Appendix 3 to this Agreement.

Section 2.09. The CVR is appointed by the Borrower's representative in order to take any necessary measures that do not contradict the provisions of Section 2.02 of this Agreement and Article V of the General Terms and Conditions.

Article III Project Execution

Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project and, to this end, carries out the Project through the CVR with due integrity and efficiency and in accordance with appropriate administrative, financial, engineering, environmental and technical practices, and, if necessary, promptly provides funds, premises, services and other resources required for the Project. (b) Without limitation with respect to the provisions of paragraph (a) of this Section, and except as otherwise agreed by the Bank and the Borrower, the Borrower carries out the Project through the CBR in accordance with the Implementation Program specified in Annex 5 to this Agreement.

Section 3.02. Unless otherwise agreed with the Bank: (a) procurement of goods and works necessary for the Project and provided for financing from the Loan; (b) procurement of consultant services for the Project is governed by the provisions of Annex 4 to this Agreement.

Section 3.03. For the purposes of Section 9.07 of the General Terms and Conditions and without limitation of its provisions, the Borrower will: (a) prepare, on the basis of guidance acceptable to the Bank, and submit to the Bank, no later than six (6) months after the Closing Date or such later date as may be agreed between the Bank and the Borrower, a plan providing for to ensure the continuity of the Project objectives; and (b) provide the Bank with a reasonable opportunity to exchange views on the above plan with the Borrower.

Article IV Financial regulations

Section 4.01. (a) The Borrower, through the CBR, maintains or ensures the maintenance of a financial management system, including accounting documents and accounts, and prepares financial statements in accordance with accounting standards acceptable to the Bank, consistently applied and adequately reflecting its operations and financial conditions, as well as accounting for transactions, resources and the Project costs. (b) The Borrower, through the CBR: (i) ensures that accounting documents, accounts, and financial statements (balance sheet, income and expense statement, and related reports) are audited for each financial year in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank; (ii) submit to the Bank, as soon as it is ready, but no later than six months after the end of the financial year (a) certified copies of the financial statements specified in paragraph (a) of this Section for each year that has been audited, (b) an opinion on these reports and a report on such audit conducted by the said auditors, to the extent and with such details as the Bank may reasonably request; and (iii) provides the Bank with other information related to the said accounting documents, accounts and financial statements, as well as audits and the said auditors, which the Bank may reasonably request from time to time. (c) For all expenses for which funds have been withdrawn from the Loan Account on the basis of expense statements, the Borrower: (i) maintains or ensures the maintenance, in accordance with generally accepted accounting practices, of accounting documents and accounts reflecting such expenses; (ii) retains, for at least one year after the Bank has received the audit report for the last financial year when funds were withdrawn from the Loan account or payments were made from a Special Account, all accounting documents (contracts, payment orders, invoices, invoices, receipts and other documents) confirming such expenses(iii) provides an opportunity for representatives of the Bank to verify such documentation; (d) The Borrower: (i) maintains records of the documents and accounts specified in paragraph (c) (i) of this Section and the documents of the Special Account for each financial year when the audit was conducted, in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank; (ii) submit to the Bank, as soon as it is ready, but no later than six months after the end of the financial year, a report on the audit conducted by the said auditors, to the extent and with such details as the Bank may reasonably request, including a separate opinion from the said auditors on whether the expense statements submitted during such financial year can serve as the basis for these withdrawals, taking into account the procedures and methods of internal control used in their preparation.; (iii) provides the Bank with other information related to the specified documents and accounts, as well as an audit, which the Bank may reasonably request from time to time.

Section 4.02. (a) In accordance with the obligations of the Borrower to provide progress reports specified in paragraph 1 of Annex 5 to this Agreement, without any restrictions, the Borrower, through the CBR, prepares and submits to the Bank a financial monitoring report in a form and content that meets the Bank's requirements, which: (i) indicates the sources and purposes of the use of funds for the Project both in aggregate and for the period indicated in the report, with a reflection of the funds received from the Loan amount and an explanation of the differences between the actual and planned use of such funds.; (ii) describes the progress of the Project both in its entirety and for the period indicated in the report, as well as explains the differences between the actual and planned implementation schedule; (iii) indicates the procurement status of the Project at the end of the period indicated in the report. (b) The first financial monitoring report shall be submitted to the Bank no later than 45 days after the end of the first calendar quarter after the Date of entry into force of this Agreement; the Report covers the period from the date of the first Project expenditures to the end of such first calendar quarter.; Further, each Financial Monitoring Report is provided to the Bank no later than 45 days after the expiration of each subsequent calendar quarter and must cover the period of such calendar quarter.

Article V Bank's sanctions

Section 5.01. In accordance with section 6.02 (p) of the General Terms and Conditions, the following additional events are specified: (a) Changes have been made to the Project Implementation Plan, or its operation has been suspended, cancelled, or abandoned without the prior consent of the Bank. (b) The Implementation Guide has been amended or its operation has been suspended, cancelled or abandoned without the prior consent of the Bank. (c) The laws, regulations, articles of association or other constituent documents of the KVR, including the legislative acts underlying such instruments, have been amended, or their operation has been suspended, annulled, cancelled or abandoned, which materially and adversely affects the ability of the KVR to fulfill its obligations under this agreement. Agreements.

Section 5.02. In accordance with section 7.01 (l) of the General Terms and Conditions, the following additional event is stipulated, namely, the event provided for in paragraphs (a), (b) and (c) of Section 5.01 of this Agreement will occur.

Article VI Termination

Section 6.01. A period of ninety (90) days from the date of signing this Agreement is hereby established for the purposes of Section 12.04 of the General Terms and Conditions.

Article VII Representatives of the Borrower; addresses

Section 7.01. The Borrower's Minister of Finance is designated as the Borrower's representative for the purposes of Section 11.03 of the General Terms and Conditions.

Section 7.02. For the purposes of Section 11.01 of the General Terms and Conditions, the following addresses are defined:

For the Borrower: Ministry of Finance, 33 Pobedy Avenue, Astana, 473000 Republic of Kazakhstan, Telex: 264126 (FILIN), Fax: (3172) 11 71 66

For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America

The Telegraph: Telex: Fax

INBAFRAD 248423 (MCI) (202)477-6391

Washington, D.C. 64145 (MCI)

In witness whereof, the Parties, acting through their duly authorized representatives, have signed this Agreement in the District of Columbia, United States of America, on the date and year indicated above.

For the Republic of Kazakhstan

Authorized representative

For the International Bank for Reconstruction and Development

Authorized representative

Appendix 1 Withdrawal of Loan funds from the account

1. The table below identifies the categories of expenses to be financed from the Loan, the allocated Loan amounts for each Category, and the percentage of expenses to be financed from the Loan for each Category.:

Category The allocated Loan amount is the share of expenses (in dollar terms) to be financed (in %)

(1) 70 jobs%

(a) for Part B of the Project, 10,420,000 (b) for others, 25,634,000

(2) 794,000 goods 100% of foreign expenses, 100% of local expenses (ex-overhead) and 84% of local expenses for other locally purchased goods.

(3) The commission for the 403,900 Amount is determined by the loan organization in accordance with Section 2.04 of this Agreement

(4) Retained earnings 3,138,100

Total 40,390,000

2. For the purposes of this Annex: (a) the term "foreign expenses" means expenses in the currency of any country other than the Borrower's country for goods or services supplied from the territory of any country other than the Borrower's country; (b) the term "local expenses" means expenses in the Borrower's currency or for goods or services supplied by from the Borrower's territory. 3. Regardless of the provisions of paragraph 1 above, funds shall not be withdrawn: (a) against payments for expenses incurred prior to the date of signing this Agreement; (b) payments for Category (1) (a) expenses for Part B of the Project prior to the establishment of ITU and its approval of the proposed work program for sediment removal and disposal from the Intumak Reservoir. 4. The Bank may request that funds be withdrawn from the Loan Account based on the billing statements to pay for (a) contractual goods in the amount of up to 250,000 dollars per contract, (b) contractual work in the amount of up to 500,000 dollars per contract, in accordance with such conditions that the Bank will specifically notify the Borrower about.

Appendix 2 Project Description

The aim of the Project is to: (a) improve the well-being of the population living in the Nura River basin by cleaning the territories adjacent to Nura from mercury pollution; (b) provide a reliable, safe and effective alternative source of water supply to meet the growing needs of local water users.; (c) to restore flow regulation in the river in order to rehabilitate the environment and regulate floods. The project, consisting of the following parts, taking into account the changes made to it, which may be agreed upon from time to time by the Borrower and the Bank, provides for the following objectives:

Part A: Mercury purification of the Nura River basin

Excavation of contaminated sites in and around the former Karbid JSC plant in Temirtau, as well as in critical areas of mercury accumulation along the banks and floodplains of the Nura River. (a) The construction of a safe, modular burial site and its use, and the organization of a long-term monitoring and maintenance program for it. (b) Excavation of contaminated soil and construction debris in Temirtau and their removal to the burial site. (c) Removal of contaminated materials from the Zhaursky swamp to the burial site. (d) Removal of contaminated materials from the KarGres septic tank to the burial site.

Part B: Restoration of the Intumak reservoir

Restoration of the dam at the Intumak reservoir, completion of the installation of adjustable gates and spillway.

Part B: Institutional development of the Nura-Sarys Basin Management

Creation of institutional capacities of the Nura-Sarys basin Management under the KVR in the framework of monitoring, water pollution control and regulation systems.

Part D: Project Management

Provision of technical assistance, including audit services, to the State Unitary Enterprise for project management.

***

The project is expected to be completed by March 31, 2009.

Appendix 3 Loan repayment schedule

Repayment date Payment of the principal debt (in dollars)*

October 15, 2008 1835000 April 15, 2009 1855000 October 15, 2009 1875000 April 15, 2010 1890000 October 15, 2010 1910000 April 15, 2011 1930000 October 15th, 2011 1950000 April 15, 2012 1965000 October 15, 2012 1985000 April 15, 2013 2005000 October 15th, 2013 2025000 April 15, 2014 2045000 October 15, 2014 2065000 April 15, 2015 2085000 October 15, 2015 2105000 April 15, 2016 2130000 October 15, 2016 2150000 April 15, 2017 2170000 October 15th, 2017 2190000 April 15th, 2018 2225000

____________________________ * The values in this column are expressed in (enter currency) and are payable, except as provided in section 4.04 (d) of the General Terms and Conditions.

Appendix 4 Procurement

Section I. Procurement of goods and works

Part A: General situation

The purchase of goods and works is carried out in accordance with the provisions of Section 1 "Guidelines. Procurement of IBRD Loans and MAP Loans", published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 (Guidelines), as well as in accordance with the following provisions of Section 1 of this Annex.

Part B: International competitive bidding

1. Unless otherwise provided in Part B of this Annex, the procurement of goods and works is carried out under contracts concluded in accordance with the provisions of Section II of the Guidelines and the provisions of paragraph 5 of Annex I thereto. 2. The following provision applies to the purchase of goods and works under contracts awarded in accordance with the provisions of paragraph 1 of Part B. (a) Pre-selection Bidders for each contract worth the equivalent of $10,000,000 and above must be pre-selected in accordance with the provisions of paragraphs 2.9 and 2.10 of the Guidelines. (b) Benefits for domestically produced goods The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Annex 2 thereto shall apply to goods manufactured on the territory of the Borrower. (c) Notification and announcement Invitations to pre-selection or bidding for each contract for the equivalent of $10,000,000 and above will be announced in accordance with the procedures applicable to large contracts in accordance with paragraph 2.8 of the Guidelines.

Part B: Other procurement procedures

International auctions Goods worth less than $100,000 per contract may be purchased under contracts awarded on the basis of international bidding procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines.

Part D: Review of procurement decisions by the Bank

1. Procurement planning The proposed procurement plan for the Project is submitted for consideration and approval by the Bank before sending out invitations for pre-selection for bidding or for submitting bids in accordance with the provisions of paragraph 1 of the Annex to the Guidelines. The purchase of all goods and works is carried out in accordance with the procurement plan approved by the Bank and in accordance with the provisions of paragraph 1.

2. Preliminary review (a) For each contract: (i) for construction works in the amount of $500,000 and above and the first contract; (ii) for goods in the amount of $250,000 and above and the first contract for which purchases were made under Part B of this Annex, the procedures specified in paragraphs 2 and 3 Appendices 1 to the Manual. (b) The following procedures apply to the first two contracts under Part B of this Annex: (i) prior to selecting a supplier at auction, the Borrower will provide the Bank with a comparison and evaluation report on the proposals received; (ii) prior to the execution of any contract concluded at auction, the Borrower will provide the Bank with a copy of the technical specifications and draft contract; (iii) the procedures specified in paragraphs 2 (e), 2 (g) of Annex 1 to the Guidelines are applied.

3. Follow-up review For each contract that has not been concluded in accordance with paragraph 2 of this Part, the procedures set out in paragraph 4 of Annex 1 to the Guidelines shall apply.

Section II. Hiring consultants

Part A: General situation

The procurement of consulting services is carried out in accordance with the provisions of Sections I and IV of the Guidelines "Selection and Hiring of Consultants by Borrowers of the World Bank", published by the Bank in January 1997 and revised in September 1997, January 1999 and May 2002 (Guidance on Consultants), paragraph 1 of Annex 1, Annex 2 and the following provisions of the Section II of this Annex.

Part B. Selection based on quality and cost

1. Unless otherwise provided in Part B of this Section, consulting services are procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines and the provisions of paragraphs 3.13-3.18 applicable to the selection of consultants based on an assessment based on quality and cost. 2. The following provisions apply to the procurement of consulting services under contracts awarded in accordance with the provisions of the preceding paragraph. The shortlist of consultants to provide consulting services with an estimated cost of up to 100,000 US dollars per contract may consist entirely of national consultants in accordance with paragraph 2.7 and footnote 8 of the Consultant Guidelines.

Part B: Different selection procedure for consultants

1. Selection based on the lowest cost Procurement of services for technical and financial audits with an estimated cost of up to 200,000 US dollars per contract may be carried out under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.6 of the Consultant Guidelines.

2. Individual consultants The services of consultants who meet the requirements listed in paragraph 5.1 of the Consultant Guidelines are purchased under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1-5.3 of the Consultant Guidelines.

Part D: The Bank's review of the selection of consultants

1. Selection planning Prior to sending requests for proposals to consultants, the Bank is provided with a consultant selection plan for the Project for consideration and approval, including an assessment of project costs, a contract package, and applicable selection criteria and procedures, in accordance with the provisions of paragraph 1 of Annex 1 to the Consultant Guidelines. All consultant services should be selected according to the selection plan (updated from time to time) approved by the Bank.

2. Preliminary review (a) For each contract with a consulting firm with an estimated value equivalent to USD 100,000 and above, the procedure set out in paragraphs 2, 3 and 5 of Appendix 1 to the Consultant Guidelines shall apply. (b) For each contract with an individual consultant with an estimated cost equivalent to 50,000 US dollars and above, a description of the qualifications, experience, terms of reference and conditions of employment of consultants is submitted to the Bank for preliminary review and approval. The contract is awarded only after receiving the specified approval. The provisions of paragraph 3 of Annex 1 to the Guidance on Consultants shall apply to such contracts. (c) For each contract with a consulting firm or consultants, regardless of the value of the contract, a technical specification is submitted to the Bank for preliminary review and approval. The contract is awarded only after receiving the specified approval.

3. Follow-up review For each contract, the conclusion of which was not regulated by paragraph 2 of this Part, the procedure set out in paragraph 4 of Annex 1 to the Guidance on Consultants applies.

Appendix 5 Implementation program

1. The Borrower: (a) will ensure that appropriate policies and procedures are in place to continuously monitor and evaluate the Project's performance and the achievement of goals and objectives, in accordance with indicators acceptable to the Bank; (b) prepare, in accordance with the terms of reference satisfactory to the Bank, and submit to the Bank on or about June 30, 2006, a report summarizing the results of the activities carried out in accordance with paragraph (a) of this Section on monitoring and evaluating the progress of the project for the period preceding the date of the said report, and listing recommended measures to ensure effective implementation of the Project and achievement of its objectives in the period after such date; (c) review, jointly with the Bank, by September 30, 2006, or later, at the request of the Bank, the report referred to in subparagraph (b) of this paragraph, and then take all necessary measures to ensure the effective completion of the project and the achievement of its objectives based on the conclusions and recommendations of the said report and the Bank's opinion thereon. 2. The borrower takes or ensures that the measures necessary for the timely implementation of the EMP are taken.

Appendix 6 Special account

1. For the purposes of this Annex, (a) the term "legitimate categories" means categories (1) to (5) specified in the Table in paragraph 1 of Annex 1 to this Agreement; (b) the term "legitimate expenses" means expenses for goods and services purchased at a reasonable cost, necessary for the implementation of the Project, provided for financing from the funds of the Loan, which are periodically allocated to eligible Categories in accordance with the terms of Annex 1 to this Agreement; (c) the term "Approved Allocation" means an amount equivalent to $500,000. The amount of $250,000 to be withdrawn from the Loan account and credited to the Special Account in accordance with paragraph 3 (a) of this Annex, provided that, unless the Bank agrees otherwise, the Approved Allocation will be limited to an amount equivalent to $250,000 until the total amount of all outstanding special obligations assumed by the Bank under Section 5.02 General Terms and Conditions, will not be equal to or exceed 5,000,000 in dollar terms. 2. Payments of funds from a Special Account are made exclusively for eligible expenses in accordance with the terms of this Application. 3. After providing acceptable evidence to the Bank that the Special Account has been opened in accordance with the established procedure, withdrawal of the Approved Allocation and subsequent withdrawal of funds for the purpose of replenishing the Special Account will be made in the following order: (a) in order to withdraw funds from the Approved Allocation, the Borrower submits to the Bank a request or requests for a deposit to the Special Account for an amount or amounts not exceeding exceeding the total amount of the Approved Allocation. Based on such request or requests, the Bank, on behalf of the Borrower, makes withdrawals from the Loan account and deposits them in a Special Account in the amount or amounts requested by the Borrower. (b) (i) in order to replenish the Special Account, the Borrower submits requests to the Bank for the transfer of funds to the Special Account at a frequency determined by the Bank. (ii) prior to or upon receipt of each such request, the Borrower shall submit to the Bank the documentation and other evidence provided for in paragraph 4 of this Annex for making the payment or payments in accordance with which replenishment of funds in the Special Account is requested. On the basis of each such request, the Bank, on behalf of the Borrower, withdraws funds from the Loan account and deposits them into a Special Account in the amount requested by the Borrower, the validity of which is confirmed by the mentioned financial and other documents attesting to the withdrawal of this amount from the Special Account to pay legitimate expenses. The Bank's withdrawal of the specified deposits from the Loan Account is carried out within the framework of the legitimate categories and in the corresponding equivalent amounts, which is confirmed by the submitted financial and other documents. 4. For each payment made by the Borrower from a Special Account, the Borrower, within the period specified in the Bank's request, submits to the Bank documentation and other evidence that such payment was made solely for legitimate expenses. 5. Regardless of the provisions of paragraph 3 of this Annex, the Bank does not accept requests for further deposits to the Special Account: (a) if at any point the Bank has determined that all further withdrawals are made by the Borrower directly from the Loan account, as provided for in Article V of the General Terms and Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower has not submitted to the Bank, within the period specified in Section 4.01 (b) (ii) of this Annex, any audit reports that must be submitted to the Bank in accordance with the specified Section regarding the audit of accounts and Special Account statements; (c) if at any time the Bank has notified The Borrower's intention to suspend partially or completely the Borrower's right to withdraw funds from the Loan Account in accordance with the provisions of Section 6.02 of the General Terms and Conditions; (d) as soon as the total outstanding amount of the Loan funds intended to finance the eligible categories, minus the total amount of all outstanding special obligations provided by the Bank in accordance with the provisions of section 5.02 of the General Terms and Conditions for the Project, is twice the amount of the Approved Appropriations. After that, the withdrawal from the Loan account of the remaining outstanding Loan amounts intended to finance legitimate categories is carried out in accordance with the procedure specified by the Bank in a special notification to the Borrower. Such further withdrawals will be made in amounts acceptable to the Bank only after the Bank has verified that all amounts remaining in the Special Account deposit as of the date of the said notification will be used to make payments for legitimate expenses. 6. (a) If the Bank determines at any time that any payments from the Special Account (i) have been made to cover expenses or in amounts that do not comply with the terms of paragraph 2 of this Annex, or (ii) are not justified by the documentation provided to the Bank, the Borrower shall immediately upon receipt of the Bank's notification (A) provide such additional confirmation that the Bank may request; or (B) deposits to a Special Account (or, upon the request of the Bank, reimburses the Bank) an amount equal to the amount of such payment or part of it, which is not sufficiently confirmed or does not fall into the category of legitimate payments. Unless the Bank agrees otherwise, no funds will be deposited into the Special Account by the Bank until the Borrower submits such confirmation in each specific case or makes the mentioned contribution to the Special Account or reimburses the funds. (b) If the Bank determines at some point that any unclaimed amount in the Special Account will not be required to cover further payments for eligible expenses. Upon receipt of the notification from the Bank, the Borrower will immediately reimburse the Bank for such unclaimed amount. (c) Upon receipt of the Bank's notification, the Borrower may reimburse the Bank in whole or in part for the funds deposited in the Special Account. (d) Funds reimbursed to the Bank in accordance with paragraph 6 (a), (b) and (c) of this Annex shall be credited to the Loan account for subsequent withdrawal or cancellation in accordance with the provisions of this Agreement, including the General Terms and Conditions.

President

Republic of Kazakhstan

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