Materials of annual general shareholders’ meeting of Kazakhtelecom JSC 11.04.2017

Place: 12, Sauran St., Kazakhtelecom JSC conference hall, Astana

Time: 21 April 2017, 15-00 by Astana time.

Registration of shareholders starts from 13-00 to 14-30 on 21 April 2017.

If quorum is absent, repeated shareholders’ meeting will held on 28 April 2017 at 15-00 on the address above.

THE AGENDA

Of annual general shareholders’ meeting
Of Kazakhtelecom JSC

Astana

21 April 2017

1) On approval of annual financial statements of Kazakhtelecom JSC for 2016.
2) On order of distributing net profit of Kazakhtelecom JSC for 2016.
3) On compensations of Kazakhtelecom JSC independent directors.

DRAFT

RESOLUTION

Of annual shareholders’ meeting of Kazakhtelecom JSC dated 21 April 2017 on issue № 1 of the agenda

«On approval of annual financial statements of Kazakhtelecom JSC for 2016

Pursuant to sub-clause 7) clause 1 article 36 of the Law of the Republic of Kazakhstan «On joint-stock companies» and sub-clause 13) clause 1 article 29 of Kazakhtelecom JSC Statutes, annual general shareholders’ meeting of Kazakhtelecom JSC had RESOLVED:

To approve annual financial statements (consolidated and separate) of Kazakhtelecom JSC for 2016 due to the Annex to this resolution.

EXPLANATORY NOTE

To the draft of resolution of annual general shareholders’ meeting of Kazakhtelecom JSC
as of 21 April 2017 on issue № 1 of the agenda

«On approval of annual financial statements of Kazakhtelecom JSC for 2016»

Audit of financial statements of Kazakhtelecom JSC for 2016 was performed by “Earnst&Young” LLC auditing company. By results of audit “Earnst&Young” LLC made a resolution on authenticity of annual financial statements of Kazakhtelecom JSC for 2016:

  • · separate and consolidated, prepared pursuant to the International Standards of Financial Statements;
  • Separate and consolidated, prepared pursuant to the forms, approved by order of the Ministry of finances of RK № 143 dated 27 February 2015.

Pursuant to the requirements of sub-clause 5) clause 2 article 53 of the Law of Republic of Kazakhstan «On joint-stock companies» (hereinafter as Law), and sub-clause 7) clause 1 article 33 of company’s Statutes, annual financial statements approved by Board of directors of Kazakhtelecom JSC (Minutes №3 dated 14.03.2017) in preliminary order for submitting to approval of general shareholders’ meeting of Kazakhtelecom JSC.

Also inform that annual financial statements (consolidated and separate) of Kazakhtelecom JSC for 2016 in specified order was approved by Auditing committee of Board of directors of Kazakhtelecom JSC (Minutes №2 dated 9 March 2017).

On basis of stated it is assumed to approve annual financial statements (consolidated and separate) of Kazakhtelecom JSC for 2016.

DRAFT

RESOLUTION
of annual general shareholders’ meeting of Kazakhtelecom JSC
dated 21 April 2017 on issue № 2 of the agenda

«On order of distributing Kazakhtelecom JSC net profit for 2016”

Pursuant to sub-clause 8) clause 1 article 36 of the Law of Republic of Kazakhstan «On joint-stock companies» and clause 3 article 24, sub-clause 15) clause 1 article 29 Kazakhtelecom Statutes, annual general shareholders meeting of Kazakhtelecom JSC had RESOLVED:

1. to approve the following order of distributing Kazakhtelecom JSC net profit for 2016 (except profit received from terminated activity) in amount of 14 872 009,000 (Fourteen milliards eight hundred seventy two million nine thousand) tenge:

30% of consolidated net profit (except profit from terminated activity) in amount of 4 461 549 007 (Four milliard four hundred sixty one million five hundred forty nine thousand seven) tenge 3 (three) tiyn to be paid as dividends by results of 2016;

The remaining part shall be on Kazakhtelecom JSC disposition.

2. to approve amount of dividends by results of 2016 by ordinary shares in amount of 404 (four hundred four) tenge 57 (fifty seven) tiyn as per 1 ordinary share.

3. to fix list of shareholders entitled to receive dividends by results of 2016, as of 00.00 minutes of first Sunday after date of annual general shareholders’ meeting.

4. to specify date for starting paying dividends by ordinary shares by results of 2016– the following work day after list of shareholders have been fixed, entitled to receive dividends by results of 2016 during one month.

5. to approve order of payment– one-time payment.

6. to approve form of payment of dividends by Kazakhtelecom JSC shares, located on 12, Sauran St., Yessil, Astana, requisites: BIN 941240000193, Account KZ779261802104233017 at Almaty branch of Kazcommertsbank JSC, BIC KZKOKZKX, Kbe16 – cash, bank transfer to shareholder’s account.

EXPLANATORY NOTE
to the draft of resolution of annual general shareholders’ meeting of Kazakhtelecom JSC
dated 21 April 2017 on issue №2 of the agenda

«On order of distributing Kazakhtelecom JSC net profit for 2016 »

Pursuant to the approved Provisions on Dividend policy of Kazakhtelecom JSC (hereinafter as Company) approach to determining amount of dividends as max value was specified from: i) 15% of net profit and ii) calculus by formula, which considers financial and economic state of the company to the end of period, investment costs, approved by Kazakhtelecom JSC Investment committee of Samruk-Kazyna, capitalized costs to NIORK.

Consolidated net profit of Kazakhtelecom JSC,fall at parent company’s owners for 2016 composed 55,831,818,000 (fifty five milliard eight hundred thirty one million eight hundred eighteen thousand) tenge, including profit after taxation from terminated activity in amount of 40,959,809,000 (forty milliard nine hundred fifty nine million eight hundred nine thousand) tenge.

Taking into account that profit from terminated activity is not supported with cash, at calculation of dividends consolidated net profit was taken as base except income from terminated activity in amount of 14,872,009,000 (fourteen milliard eight hundred seventy two million nine thousand) tenge (or net profit to be distributed).

According to resolution of Board of directors of the company dated 14 March 2017 (Minutes №3) for consideration of annual general shareholders’ meeting of Kazakhtelecom JSC shall be included to next proposal on order of distributing net profit for 2016:

30% consolidated net profit (except income from terminated activity) in amount of 4,5 milliard tenge shall be paid as dividends by results of 2016.

Total amount of dividends (taking into account fixation of dividend as per one share to tiyn, two symbols after comma) will compose 4 461 549 007 (four milliard four hundred sixty one million five hundred forty nine thousand seven) tenge 3 (three) tiyn, including:

- by ordinary shares– 4 331 861 666 (four milliard three hundred thirty one million eight hundred sixty one thousand six hundred sixty six) tenge 11 (eleven) tiyn;

- by privileged shares– 129 687 340 (one hundred twenty nine million six hundred eighty seven thousand three hundred forty) tenge 92 (ninety two) tiyn.

Amount of dividend as per one ordinary share by results of 2016 will compose 404 (four hundred four) tenge 57 (fifty seven) tiyn.

Amount of dividends of Samruk-Kazyna JSC (51% from ordinary voting shares or 5 570 668 ordinary shares) will compose 2 253 725 152 (two milliard two hundred fixty three million seven hundred twenty five thousand one hundred fifty two) tenge 76 (seventy six) tiyn.

By resolution of Kazakhtelecom JSC Board №46/242 dated 05.12.2016 in December 2016, secured amount of dividends by privileged shares in amount of 300 tenge as per one share was charged and paid off.

According to the clause 1 article 24 of the Law of Republic of Kazakhstan «On joint-stock companies» amount of dividends, charged by privileged shares, cannot be lesser than amount of dividends, charged by ordinary shares for this period. Amount of exceeding amount of dividend as per one ordinary share (404,57 tenge) over amount of secured dividend by privileged shares (300 tenge) in amount of 104 (one hundred four) tenge 57 (fifty seven) tiyn will be charged and to be paid by privileged shares of the Company.

Pursuant to sub-clause 15 clause 1 article 29 of Company’s Statutes exclusive competence of general shareholders’ meeting is «approval of net profit distribution order for reporting financial year, taking decision on paying dividends by ordinary shares and approval of dividends amount as per one ordinary share of the company». Due to the clause 9-1 Provisions on Dividend policy of the company «in separate cases amount of dividends can be specified by general shareholders’ meeting in a special order».

DRAFT

RESOLUTION
of annual general shareholders’ meeting of Kazakhtelecom JSC
dated 21 April 2017 on issue №3 of the agenda

«On compensations of Kazakhtelecom JSC independent directors»

Pursuant to sub-clause 5) clause 1 article 36 of the Law of Republic of Kazakhstan «On joint-stock companies» and sub-clause 10) clause 1 article 29 of Kazakhtelecom JSC Statutes, annual general shareholders’ meeting of Kazakhtelecom JSC had RESOLVED:

1. to specify the following amount of annual fixed compensation of Kazakhtelecom JSC independent director:

- for nonresident of Republic of Kazakhstan– 45 000 USD,

- for resident of the Republic of Kazakhstan– 14 400 000 tenge.

2. to specify the following amount of extra compensation of Kazakhtelecom JSC independent director for participation in each in presentia meeting of committee of Board of directors as a member of committee, including by means of tele-video conferencing:

- for nonresident of Republic of Kazakhstan– 500 USD;

- for resident of the Republic of Kazakhstan– 160 000 tenge.

3. to pay Dmitry Zaika extra compensation in amount of 43 000 000 (forty three million) tenge by results of work for 2016.

4. Chairman of the Board of directors of Kazakhtelecom JSC shall take measures due to this resolution.

EXPLANATORY NOTE
to the draft of resolution of annual general shareholders meeting of Kazakhtelecom JSC
dated 21 April 2017 on issue №3 of the agenda

«On compensations of Kazakhtelecom JSC independent directors»

1. Pursuant to the Policy of compensation of independent members of Board of directors of Kazakhtelecom JSC, approved by resolution of extraordinary general shareholders meeting (Minutes dated 29 December 2011 № 46) (hereinafter as «Compensation policy»), independent director received the following compensations:

1) annual fixed compensation; 2) extra compensation for participation in meetings on presentia of Committees as a member of committee.

Due to the resolution above also following compensations have been specified:

1) annual:

- for nonresident of the Republic of Kazakhstan– 45 000 usd, - for resident of the Republic of Kazakhstan– 6 660 000 tenge;

2) extra:

- for nonresident of the Republic of Kazakhstan– 500 usd; - for resident of the Republic of Kazakhstan– 75 000 tenge.

The amounts were equivalents to each other due to currency rate. However today USD rate considerably grew that requires revision of level of compensation in tenge for securing fair compensation of independent directors who are residents of Kazakhstan.

Thereby it is offered to raise level of compensation in tenge respectively to usd rate 1$≈320 tenge.

This measure will allow make equal independent directors in compensations they receive, considering their role and functions in Board of directors and its committees.

2. Pursuant to the clause 22 of Compensation policy, by resolution of general shareholders meeting of Kazakhtelecom JSC, independent director of the company can get extra compensation by results of work for a year.

Thereby, general shareholders’ meeting offered to consider an issue on paying extra compensations to Dmitry Zaika, who is Chairman of Committee for personnel, compensations and social issues of Board of directors, and member of Auditing committee and strategic planning.

D.A.Zaika as an independent director of Board of directors, made considerable practical contribution to Kazakhtelecom JSC work in 2016, securing complete execution of functional obligations within activity of Board of directors and the committees.

Thus, D.A.Zaika actively participated in development of Kazakhtelecom JSC mobile segment, presenting practical recommendations and analytics for decision making by developing strategy of Kazakhtelecom JSC in part of mobile services, including within realization of bargain on joining mobile operators «ALTEL» JSC and «Mobile Telecom -Service» LLC, formation and creation of joint venture with Tele2 AB.

Within the bargain, D.A.Zaika, on behalf of Kazakhtelecom JSC Board of directors as shareholder of joint venture, provided consultations in decision making of Kazakhtelecom JSC Board of directors when coordinating bargain terms, when forming business plan, goals and planned indices of joint venture activity, and in 2016 at practical integration process of two mobile operators businesses (ALTEL JSC and Mobile Telecom -Service LLC).

Result of this work became successful completion of bargain in 2016. In auditing statements of Kazakhtelecom JSC for 2016 income from such bargain in amount of 4,9 milliard tenge is reflected.

Within activity of Committee for personnel, compensations and social issues of Board of directors, under guidance of D.A.Zaika a complex work of Committee for evaluation of key positions of Kazakhtelecom JSC at level of Kazakhtelecom JSC Board was held for the first time. The work allowed confirming professional management level of the company before privatization of shares, appropriated by Samruk-Kazyna FNP JSC.

Due to the above stated, it is offered to pay to D.A.Zaika extra compensation in amount of 43 000 000 (forty three million) tenge by results of work for 2016.

Considering that issue on compensation of members of Board of directors is referred to an exclusive competence of the supreme body of the company, an issue “On some issues of compensation of independent directors of Kazakhtelecom” shall be considered by annual general shareholders meeting.

On first issue:

RP 8_30 GFO dated 02.03.17.pdf

Extract КА GFO.pdf

Extract BD №3 dated 14.03.2017GFO.pdf

Cons ISFS 2016 rus.pdf

sepr ISFS rus.pdf

Cons 143.pdf

Sepr 143.pdf

On second issue

Extract BD №3 dated 14.03.2017 - 4 Dividends.pdf

On third issue

Extract ККВСВ dated 29.03.17.pdf

Annexes 1 and 2 to РККВСВ dated 29.03.17.pdf

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