PROTECTING MINORITY INVESTORS IN KAZAKHSTAN. DB - 2017

1. REFORMS TO IMPROVE POSITION OF KAZAKHSTAN IN “DOING BUSINESS” IN TERMS OF “PROTECTING MINORITY INVESTORS”

2. PROTECTING MINORITY INVESTORS IN KAZAKHSTAN. DB - 2017

3. PROTECTING MINORITY INVESTORS IN KAZAKHSTAN. DB - 2017

4. REFORMS FORPROTECTING MINORITY INVESTORS IN KAZAKHSTAN “Doing Business”2018

5. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform The law of Kazakhstan “On Joint Stock Companies” Article 63. Responsibility of Company’s officials … 1-1. Company based on a decision of General meeting of shareholders or a shareholder (shareholders) owing (owing in total) five and more percent of company’s voting shares, on their own behalf in the interests of the company may file a lawsuit in court on bringing officials to responsibility for the harm caused to the company as a result of interested party transaction made by the company and as a result of which the company acquired or disposed of property with value of ten and more percent of total amount of carrying value of its assets in simultaneous presence of the following conditions: if it is proved that at the time of making a decision on concluding the transaction, the value of such property appears to be disproportionate to its market value specified by appraiser in compliance with the Law of the Republic of Kazakhstan “On appraisal activities in the Republic of Kazakhstan” court established the fact of intentional misrepresentation of the company's shareholders by its official person (s) for the purpose to receive the profit (income) by himself / herself or his /her affiliated persons.

6. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform The Law of the Republic of Kazakhstan “On Joint Stock Companies” Article 74. After effects of the Company’s transactions fulfilled under the special conditions 1. Failure to comply with the requirements of this Law for a major transaction and the interested party transaction as well as fulfillment of other transactions in violation of the requirements of the legislation of the Republic of Kazakhstan shall entail the recognition of these transactions invalid in the court, at the suit of the person concerned in the manner and on the grounds provided by the legislation of the Republic of Kazakhstan.. An interested party transaction as a result of which the company acquired or alienated property whose value is ten percent or more of the total book value of its assets, and as a result of which the company is harmed, may be invalidated by the a of the shareholder (shareholders) owning (in aggregate owning) five or more percent of the voting shares of the company, with simultaneous fulfillment of the following conditions: if it is proved that at the time of making a decision on concluding the transaction, the value of such property appears to be disproportionate to its market value specified by appraiser in compliance with the Law of the Republic of Kazakhstan “On appraisal activities in the Republic of Kazakhstan” court established the fact of intentional misrepresentation of the company's shareholders by its official person (s) for the purpose to receive himself / herself or his /her affiliated persons the profit (income).

7. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform The Civil Procedure Code of the Republic of Kazakhstan Article 46. Rights and duties of persons participating in the case 3. Parties involved in a corporate dispute shall be entitled to request from each other and from witnesses any documents relevant to the case without specifying each particular document. Parties cannot request from each other and from witnesses any documents containing state secrets or other secrets protected by the law.

8. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform • The Law of Kazakhstan “On Joint Stock Companies” • Article 18. Allotment of Company’s shares • A joint stock company may allot its shares after the state registration of their issuance through one or more placements within the limits of the authorized shares. The decision to allot the company's shares within the number of its authorized shares is taken by the board of directors of the company, except for the cases when the charter of the company refers the matter to the competence of the general meeting of the shareholders. • The decision to allot shares of a public company within the limits of the number of announced shares is taken by the general meeting of shareholders of a public company.       The shares are allotted under the pre-emptive rights of the shareholders for the shares or other securities, convertible into the ordinary shares of the company, subscription or a bid, conducted at the organized securities market or subscription or a bid, conducted at the organized securities market, as well as through the conversion of securities and (or) financial liabilities of the company into the shares of the company in the cases, provided in this Law and other legislative acts of the Republic of Kazakhstan.

9. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform The Law of the Republic of Kazakhstan “On Joint Stock Companies” Article 53. The board of directors 2. Unless otherwise provided by this Law and (or) the charter of the company, the exclusive competence of the board of directors include the followings: … 3) decision making on placement (sales), including on the number of the allotted (offered) shares within the number of the authorized shares, the method and the offering price (offer), except for the cases provided by the second part of paragraph 1 of Article 18 of this Law; FOR REFERENCE : The Law of Kazakhstan “On Joint Stock Companies” Article 18. Allotment of Company’s shares 1. A joint stock company may allot its shares after the state registration of their issuance through one or more placements within the limits of the authorized shares. The decision to allot the company's shares within the number of its authorized shares is taken by the board of directors of the company, except for the cases when the charter of the company refers the matter to the competence of the general meeting of the shareholders. The decision to allot shares of a public company within the limits of the number of announced shares is taken by the general meeting of shareholders of a public company.

10. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform • The Law of Kazakhstan “On Joint Stock Companies” • Article 53-1. Committees of the board of directors • 1. In order to consider the most important issues and to make recommendations to the board of directors, the committees of the board of directors shall be established in the company. • 2. Committees of the board of directors consider the following questions: • for strategic planning; • for resources and remuneration; • for internal audit function; • for social issues; • other matters provided by internal documents of the company. • Consideration of issues listed in part one of this paragraph may be attributed to the competence of one or several committees of the board of directors, with the exception of internal audit issues considered by a separate committee of the board of directors.

11. REFORMS ДЛЯ ЗАЩИТЫ МИНОРИТАРНЫХ ИНВЕСТОРОВ В КАЗАХСТАНЕ REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform The Law of Kazakhstan “On Joint Stock Companies” Article 24. Dividends on the preferred shares 1. Payment of dividends on the preferred shares of a company shall not require a decision of the company’s body. Frequency of payment of the dividends and the amount of the dividend per preferred share shall be established by the company’s charter. Dividends must be paid no later than ninety days from the date of drawing up the list of shareholders entitled to receive dividends, if there is an information on the shareholder’s actual details in the system of registers of shareholders of the company. In case of information absence on the shareholder’s actual details, dividends on preferred shares must be paid within ninety days from the date of the shareholder's application to the company with a document confirming the entrance of necessary information about him in the system of shareholder registers of company. The amount of dividends accrued on preferred shares may not be less than the amount of dividends accrued on common shares for the same period. Dividends on common shares of the company are not paid until the dividends on preferred shares are fully paid to shareholders entitled to receive dividends, and for which there are actual details in the system of shareholder registers of the company.

12. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform • The Law of the Republic of Kazakhstan “On Partnerships with Limited and Additional Liability” • Article 43. Competence of the General meeting of participants of a Limited Liability Partnership • The exclusive competence of the General meeting of participants of a Limited Liability Partnership includes: • … • 2) Formation of the executive body of the company and early termination of its authority or the authority of individual member of the executive body, as well as decision making to entrust the limited liability company or its property and determining the conditions of such transfer;

13. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform • The Law of RK “On Partnerships with Limited and Additional Liability” • Article 59. External audit of a Limited Liability Partnership • To verify and confirm accuracy of annual financial statements of a Limited Liability Partnership, as well as current position of the company, the partnership has the right in cases and in manner stipulated by its charter to engage an audit organization with no affiliation to property interests with partnership, members of its Executive body, Supervisory Board or parties (external audit). • Audit of annual financial statement is mandatory for a Limited Liability Partnership if it simultaneously meets the following conditions: • it consists of participants (founders) owing less than ten percent of shares in the share capital; • 2) average number of employees is more than two hundred and fifty persons and (or) annual income is over 3 mln. monthly calculation index established by the Law on republican budget and effective as of January 1stof the relevant financial year. • Audit of annual financial statement for a Limited Liability Partnership relating to medium-sized businesses is held at the request of the participant (founder) owning less than ten percent of participation shares in the share capital of a Limited Liability Partnership.

14. REFORMS FOR PROTECTING MINORITY INVESTORS IN KAZAKHSTAN Reform • The Law of Kazakhstan “On Audit Activities” • Article 5. Audit and its types • 2. Audit is obligatory for: • … • a Limited Liability Partnership if it simultaneously meets the following conditions: • it consists of participants (founders) owing less than ten percent of shares in the share capital; • 2) average number of employees is more than two hundred and fifty persons and (or) annual income of over 3 mln. monthly calculation index established by the Law on republican budget and effective as of January 1st of the relevant financial year. • Audit of annual financial statements for a Limited Liability Partnership relating to medium-sized businesses is held at the request of the participant (founder) owning less than ten percent of participation shares in the share capital of a Limited Liability Partnership. • Organization for which audit is obligatory and which in compliance with the legislation of the Republic of Kazakhstan publishes annual financial statements in periodicals must publish the auditor’s report along with annual financial statements.

15. REFORMS TO IMPROVE POSITION OF KAZAKHSTAN IN “DOING BUSINESS” RANKING IN TERMS OF “GETTING CREDIT”

16. GETTING CREDITS INDEX IN KAZAKHSTAN DB - 2017

17. GETTING CREDITS INDEX IN KAZAKHSTAN DB - 2017 MID Rolling stock Pledge agreement Is signed Applying to registration authority with submission a hard copy of pledge agreement MIA Motor transport NB securities MJ Movable property not Subject to obligatory registration MAI Agricultural equipment THE UNIFIED REGISTRY OF MOVABLE PROPERTY PLEDGE Electronic application Is forwarded from second-tier bank system ...or on web-portal Egov.kz Advantages: • An opportunity to register pledge without visiting registering authority or submission of a hard copy of agreement • Registration result is given electronically • It is not required to run after pledge holder or apply to registering authority for releasing from pledge • Information of registered pledge is given electronically

18. GETTING CREDIT INDEX IN KAZAKHSTAN DB - 2017

19. GETTING CREDIT INDEX IN KAZAKHSTAN DB - 2017 The provisions of the Law of the RK “On Credit Bureaus and Formation of Credit Histories in the Republic of Kazakhstan” directly allow credit bureaus to provide statistical (scoring) services The Law on credit bureau does not oblige consumers of credit bureau services (banks, microfinancial organizations, other credit organizations) to use statistical (scoring) models of credit bureaus Banks and other credit organizations in the framework of credit risk assessment can apply their own statistical (scoring) models of risk assessment At present credit bureaus provide statistical (scoring) and other analytical services.

20. REFORMS FOR GETTING CREDIT “Doing Business”2018

21. REFORMS FOR GETTING CREDITS IN KAZAKHSTAN Reform • The Law of the Republic Of Kazakhstan “On registration of pledge of movable property” • Article 6. Peculiarities of registration of pledge of certain types of movable property • Registration of pledge of equity securities, including through the unified registry of movable property pledge shall be in compliance with the legislative acts of the Republic of Kazakhstan on registration of transactions with securities. Registration of securities performed in compliance with the legislative acts of the Republic of Kazakhstan shall be subject to the rules of Article 8 of this Law. • The Law of the Republic Of Kazakhstan “On securities market” • Article 37. Registration of pledge of rights on issuance securities • 1. … • Transfer of orders of the pledger and the pledge holder is allowed in respect of transactions related to encumbrance of equity securities through a single pledge of movable property. • The procedure for the execution of orders of the pledger and the pledge holder in respect of transactions related to encumbrance of equity securities through a single register of pledge of movable property is determined by the legislation of the Republic of Kazakhstan and internal documents of the central depository (registrar).

22. REFORMS FOR GETTING CREDITS IN KAZAKHSTAN Reform The Civil Code of the Republic of Kazakhstan (General part) Article 307. Content and form of pledge agreement 1. Pledge agreement shall indicate the pledged object, the subject matter, its evaluation or maximum amount and term of execution of the obligation secured by pledge. If pledged item is an immovable property, pledge agreement shall specify its valuation. Movable property and (or) certain categories of movable property (including machinery and inventory) that are pledged may have general description of pledge item without requiring a specific description of pledge. The pledge agreement should also contain an indication on pledged property possession by the parties and the permissibility of its use.

23. GETTING CREDITS INDEX IN KAZAKHSTAN. DB - 2017 Reform • The Civil Code of the Republic of Kazakhstan (General part) • Article 327. Pledge of goods in circulation • Pledge of goods in circulation is a pledge of goods with their leaving with pledger, and with granting a right to pledger to change composition and natural form of the pledged property (inventory, raw materials, semi-finished products, finished products, etc.). • For reference: • The first part of paragraph 1 of Article 327 shall be read with exclusion of the words “if their total value does not become less than that specified in pledge agreement”. • The second part of paragraph 1 of Article 327 is excluded: • “Reduction in value of pledged goods in circulation shall be allowed in proportion to executed part of the secured obligations, unless otherwise provided by the agreement”. • Former reform: • Article 309. Assets that is subject to rights of the pledge holder • Unless otherwise stipulated in the agreement or legislative acts, the rights of the pledge holder (the right to pledge) in respect to the object that is a subject of the pledge, shall apply to its accessories and inseparable goods. • In the cases stipulated by the agreement or legislative acts the right to pledge may apply to the separable goods, production as well as income received as a result of the use of the pledged property.