Corporate
governance

Corporate governance structure

The company sees effective corporate governance more than just compliance with requirements. Effective corporate governance system is an important factor in sustainable development business and successful implementation of the Strategy

(https://www. samruk-energy.kz/ru/shareholders-and-investors/annual-reports-on-the-results-of-the-company-s-activities).

A particular attention in 2019 was given to improving internal corporate procedures and practices in accordance with the activities described in the Corporate Governance Improvement Plan approved by the Board of Directors for 2019–2021. The Board of Directors Committess with a new team were established. The new initiatives in the field of sustainable development were developed, and processes that contributes to the improvement of the Board of Directors and the Executive Body’s performance were introduced. The Regulations on the Ombudsman, the Regulations on the Management Board, the Information Policy, the Code of Conduct, the Investment Policy and the Policy for the Settlement of Corporate Conflicts and Conflicts of Interest and other internal regulatory documents were revised for improving the system of relations between governing bodies, investors, shareholders and stakeholders.

The Corporate Governance Improvement Plan for 2019 provided for 131 activities, 125 activities were implemented, 3 were implemented partially, 2 – were not executed and 1 activity is in progress. The implementation of the Plan at the end of 2019 amounted to 95.4 %.

A particular attention in 2019 was given to improving internal corporate procedures and practices in accordance with the activities described in the Corporate Governance Improvement Plan approved by the Board of Directors for 2019–2021. The Board of Directors Committess with a new team were established. The new initiatives in the field of sustainable development were developed, and processes that contributes to the improvement of the Board of Directors and the Executive Body’s performance were introduced. The Regulations on the Ombudsman, the Regulations on the Management Board, the Information Policy, the Code of Conduct, the Investment Policy and the Policy for the Settlement of Corporate Conflicts and Conflicts of Interest and other internal regulatory documents were revised for improving the system of relations between governing bodies, investors, shareholders and stakeholders.

The Corporate Governance Improvement Plan for 2019 provided for 131 activities, 125 activities were implemented, 3 were implemented partially, 2 – were not executed and 1 activity is in progress. The implementation of the Plan at the end of 2019 amounted to 95.4 %.

Compliance with the principles and provisions of the Corporate Governance Code

The principles of the corporate governance system were set out in the Corporate Governance Code of the Company: strict observance of the rights of shareholders, investors and other stakeholders; a clear separation of powers and responsibilities between the bodies of the Company and divisions; increasing the effectiveness of the Board of Directors and its Committees, as well as the Executive Body and its Committees; prevention of corporate conflicts and conflicts of interests; improvement of management reporting system; the pursuit to apply the best global corporate governance practices; compliance with the principles of information transparency for shareholders and other interested parties; ensuring the availability of effective planning processes, internal control, compliance and internal audit, risk management and sustainable development management; information transparency for shareholders and other interested parties.

Based on the results of the self-assessment, the Company as a whole ensures compliance with the basic principles and provisions of the Code. The exception was 4 items, which were assigned the status “Partially Complies”

1. Item 2 of Chapter 1 : “Government as the shareholder of the Fund” according to which Companies should seek to simplify the structure of their assets and their legal forms to the maximum. So, the Company’s group includes subsidiaries of various corporate forms: both joint-stock companies and limited liability partnerships. Due to the implementation of activities on the sale of the Company for the purpose of the execution of the RK Government decree dated December 30, 2015 No. 1141 “On some matters of privatization for 2016–2020,” as well as the decisions made by the State Commission for the Modernization of the Economy of the Republic of Kazakhstan and authorized bodies of the Fund in this connection, on issues relating to the approval of the method and strategy of sale of the Company, including the perimeter of companies included in the group of the Company as part of the privatization of the Company as a whole, at present, the structure of assets and corporate forms of subsidiaries and affiliates of the Company is not expected to change. Assets will be sold within the Company’s privatization as a whole.

2. Item 5 of Chapter 5: “Effectiveness of the Board of Directors and Executive Body”, according to which it is necessary to provide a variety of experience, personal characteristics and gender composition in the composition of the Board of Directors. The current composition of the Board of Directors provides diversity in the necessary skills, knowledge and competencies, but does not provide gender diversity. The Company decided to take into account this factor at reelection of the Board of Directors members.

3. Item 12 of Chapter 5: “Effectiveness of the Board of Directors and Executive Body”, in order to perform their job responsibilities, the Board of Directors shall have access to the complete, relevant and timely information. At this, there were cases of adding additional items to the agenda during meetings of the Board of Directors during 2019, which, respectively, violated the deadline for submission of materials, and members of the Board of Directors noted cases of poor preparation of materials submitted to the Board of Directors. In this connection, the Regulations on the Board of Directors was updated, which includes the guidelines for preparation of materials to be reviewed. The Corporate secretary has scheduled the internal training on the improvement of the quality of preparing materials submitted to the Board of Directors for the Company’s employees. The Company plans to update its Regulations on the management of subsidiaries and affiliates, which will also involve the section of ensuring timely and quality preparation of materials.

4. Item 18 of Chapter 5: “Effectiveness of the Board of Directors and Executive Body”, according to which the Board of Directors elects the head and members of the executive body, sets the terms of office, the amount of wages, conditions of their labor remuneration, and terminates the powers of the head and members of the executive body. In accordance with the Charter and internal documents of the Company, the Board of Directors determines the size, term of office of the Management Board, elects members of the Management Board, early terminates their powers (except for the Chairman of the Management Board). The matter of appointment (election) and early termination of powers of the Company’s Chairman of the Management Board pertains to the competence of the Sole Shareholder. The Corporate Governance Code was approved by the decision of “Samruk-Kazyna” JSC Management Board, and accordingly it is regulated by the Sole Shareholder.

The Company’s performance has a positive dynamics compared to the previous reporting period. In 2018, the Company partially complied with six items. Two of which were implemented in 2019. This is the introduction of the induction program for newly elected members of the Board of Directors and the professional development program for each member of the Board of Directors, as well as bringing the Regulations on the Ombudsman in accordance with the recommendations of the Code as regards the quarterly submission of the Progress Report to members of the Board of Directors and the Audit Committee of the Board of Directors. The Company intends to continue improving corporate governance in order to increase business efficiency and strengthen its competitive advantages. First, the Company plans to focus on the implementation of those practices and procedures that are more in demand and the applicability of which is confirmed by best practice.

Please follow the link https:// www.samruk-energy.kz/ru/shareholders-and-investors/ other-reporting#corporate-governance-code-report to learn more about the report on compliance of corporate governance practices with principles and provisions of the Corporate Governance Code.

Organizational structure of “Samruk-Energy” JSC

The following changes were made in 2019:

— Functional reporting of Occupational Health and Safety, Environmental protection department was transferred to the Chairman of the Management Board.

— The position of Co-Managing Director for Economy and Finance was introduced.

The Shareholder

“Sovereign Wealth Fund “Samruk-Kazyna” JSC holds 100 % of “Samruk-Energy” JSC shares (www.sk.kz). The sole shareholder is the supreme management body of the Company. The rights of the Sole Shareholder are exercised in accordance with the Law of the Republic of Kazakhstan “On joint-stock companies” and the Charter of “Samruk- Energy” JSC. The rights of shareholders include, but are not limited to the timely receipt of information sufficient to make a decision, in the manner established by the legislation of the Republic of Kazakhstan, the charter and internal documents of the Company in the field of information disclosure; voting on matters within its competence; participation in determining the size, term of office of the Board of Directors, election of its members and termination of their powers, as well as setting the amount and terms of payment of remuneration; receipt of dividends based on a clear and transparent dividend policy.

The sole shareholder manages the Company by establishing priorities and strategic areas of business. The Сompany, in turn, seeks to ensure protection and respect for the rights and legitimate interests of the Sole Shareholder. The relationship with the Sole Shareholder is based on honesty, accountability, responsibility and transparency. In 2019, the Sole Shareholder considered matters related to the approval of the annual financial statements of the Company and the distribution of net profit based on the results of the 2018 fiscal year, the early termination of powers of some members of the Board of Directors, the election of new members and the Chairman of the Board of Directors.

The company, in turn, is committed to complying with interests of the Sole Shareholder by ensuring the growth of long-term value and sustainable development of activities and building the most open and effective dialogue of the Sole Shareholder.

The Company timely and regularly provides the Sole Shareholder with information on its activities to the extent necessary for making an informed decision through meetings, reporting and posting the necessary information on the Company’s website, KASE and the financial reporting depository.

Equity holding structure

As of December 31, 2019, the number of authorized securities remained at the same level and amounted to 8,602,187 pieces. The number of placed securities is 5,601,687 pieces.

The carrying value of one ordinary share as at December 31, 2019 amounted to 85,925 tenge. Earnings per share was 1,220 tenge.

Dividend policy

The Company has the Dividend Policy of “Samruk-Kazyna” JSC in relation to subsidiaries, approved by the resolution of “Samruk-Kazyna” JSC Management Board dated October 2, 2012 (Minutes No. 39/12). Dividend policy is based on the following principles:

1) meeting interests of the Sole Shareholder;

2) increase in the long-term value of the Company;

3) ensuring the financial stability of the Company;

4) providing financing of the Company’s activities, including financing of investment projects implemented by using the Company’s funds;

5) transparency of the mechanism for determining the amount of dividends;

6) the balance of short-term (income generation) and longterm (development of the Company) interests of the Sole Shareholder.

Dividends are calculated based on the amount of a company’s net income reported in the annual audited financial statements of the Company, compiled in accordance with the requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting and international financial reporting standards.

Dividends on ordinary shares in the amount of 2,041,000,000 according to the 2018 results were paid in 2019 by the decision of the Sole Shareholder.