Provision on JSC Kazakhtelecom’s Board of Directors (стр. 1 )

Approved

by resolution of the extraordinary

General shareholders’ meeting

JSC Kazakhtelecom

Protocol № 46, as of December 29, 2011

(as of 18.01.2013)

PROVISION

on JSC Kazakhtelecom’s Board of Directors

1.General provisions

1. Provision on the Board of Directors of Joint Stock Company Kazakhtelecom (hereinafter the Provision) has been worked out pursuant to the Law of the Republic of Kazakhstan “On Joint Stock Companies”, the Charter and the Corporate Governance Code of JSC Kazakhtelecom.

2. This Provision shall determine the status, activity procedure, competence of the Board of Directors of Joint Stock Company Kazakhtelecom (hereinafter the Company), procedure for convocation and holding its meetings, execution of resolutions and responsibility of the Board’s members.

(a change has been introduce to item, protocol № 49of EGSM as of 18.01.2013 )

3. The Board of Directors is the Company’s management body performing general management of the Company, except for the issues attributed, pursuant to the legislation of the Republic of Kazakhstan and/or the Charter of the Company, to the exclusive competence of the General Shareholders’ Meeting, and controlling the activity of the Company’s Management Board.

4. Activity of the Board of Directors shall be governed by legislation of the Republic of Kazakhstan, the Company’s Corporate Governance Code, Charter, this Provision, decisions of the General meetings of shareholders, and other internal documents of the Company.

5. Activity of Board of Directors shall be based on principles of reasonableness, efficiency, fair practice, honesty, responsibility and civility.

Members of Board of Directors should act and take objective decisions, by avoiding any conflicts, in the interests of the Company and shareholders thereof.

Members of Board of Directors shall ensure that activity thereof meets legislative requirements of the Republic of Kazakhstan, principles of the Corporate Governance Code of the Company, ethic standards and generally accepted business ethics standards.

6. Members of Board of Directors shall, with the view to efficient carrying out activities thereof, have the right to request the Management Board and the Internal Audit Department to provide accurate, complete information and required explanations when due.

The Board of Directors of the Company and members of the Board of Directors shall have other rights and duties provided for in the legislation of the Republic of Kazakhstan, the Charter of the Company and this Provision.

7. Decisions of the General meeting of shareholders, taken within competence thereof, shall be binding upon the Board of Directors. The Board of Directors shall submit to the General meeting of shareholders annual report, being included in the annual report of the Company, within the deadlines established by the General meeting of shareholders including the report on internal control system of the Company. The Board of Directors must submit reports to the extraordinary General meeting of shareholders if such issue has been included in the agenda.

The annual report of Board of Directors shall inter alia include the following information:

1) composition of the Board of Directors and the Management Board, including the Chairman of Board of Directors, independent directors, criteria for election of independent directors, Chairman of the Management Board and members of the Board of Directors’ committees;

2) number of meetings of the Board of Directors and the Board of Directors’ committees, and each director’s attendance of meetings of the Board of Directors and committee a member of which he/she is;

3) record of committees’ performance, including the reasons of the Board of Directors’ rejection of some proposals and/or recommendations of committees;

4) the Board of Directors and the Management Board’s performance record, including complete information on issues decisions on which are taken by the Board of Directors or the Management Board, and issues decisions on which were delegated to the Chairman of the Management Board;

5) size of remuneration payable to directors;

6) assessment of the Company ranking and perspectives of its development;

7) procedure of carrying out assessment of performance of the Board of Directors, committees, curtain directors, the Management Board, the Internal Audit Department and head of the Internal Audit Department;

8) measures taken by the Board of Directors with the account of shareholders’ opinion on the Company (by means of a direct contact, briefings).

2.Competence of the Board of Directors

8. The Competence of the Board of Directors shall be determined by laws of the Republic of Kazakhstan, the Charter, the Corporate Governance Code, and other internal documents of the Company.

9. The Board of Directors and the Management Board shall substantiate, for shareholders and interested persons, the necessity of taking decisions which may result in substantial corporate events, planned changes in the Company’s activity, the Company’s liquidation, and represent a curtain policy of preservation and protection of shareholders’ rights.

10. The Board of Directors shall:

1) keep a close watch on, and where possible eliminate, potential conflicts of interests at the level of executives and shareholders, including illegal use of the Company’s property and abuse in course of making interested party transactions;

2) take control over the efficiency of the Company’s corporate governance practices.

11. The Board of Directors, in cooperation with the Audit Committee and the Internal Audit Department, shall:

1) assess, at least once a year, the Company’s internal control system performance and submit such assessment report to shareholders;

2) establish an official and transparent procedure of, determining principles of financial reporting and internal control and, establishing appropriate relations with outside auditors of the Company.

position of the Board of Directors and the Board of Directors’ committees

12. The Board of Directors shall consist of nine (9) elected members each having the right of 1 (one) vote. Assignment of the voting rights from one member of the Board of Directors to another shall be prohibited.

13. The compilation of the Company’s Board of Directors shall consist of the Chairman and other members of the Board of Directors.

14. The Chairman of the Board of Directors shall be elected among its members by a simple majority of votes out of the total number of the members of the Board of Directors by an open or secret vote depending on the method chosen by the Board of Directors. The Board of Directors shall have the right to re-elect its Chairman any time by the majority of votes out of the total number of the members of the Board of Directors.

(item 15 is set out in new wording, protocol EGSM № 49 as of 18.01.2013)

15. With a view to facilitating efficient performance by the Board of Directors of its duties, to considering the most crucial issues and preparing recommendations for the Board of Directors, the following committees of the Board of Directors shall be formed in the Company:

1) for strategic planning;

2) for audit;

2) for appointments and remunerations;

4) for other issues upon Board of Directors’ decision.

Creation of the Board of directors’ committees on other issues may be provided for following the relevant decision of the Company’s Board of directors.

16. The committees shall be established by the Board of Directors and consist of its members. If required, the committees may consist of experts possessing professional knowledge required for the work in a committee.

The Chairman of the Company’s Management Board shall not be a member of the Board of Directors’ committee.

All committees’ performance shall be regulated by internal documents which are approved by the Board of Directors and contain provisions on composition, competence, rules and regulations of committees, committee members election procedure, and rights and responsibilities thereof.

17. Committee meetings shall be attended by Committee Chairman and committee members only. Other persons shall be allowed to attend committee meetings upon an appropriate committee’s invitation only.

18. The Board of Directors and the Board of Directors’ committees shall draw up the working plan and meetings schedule on an annual mittee meetings shall be recoded and such records shall be submitted to the Board of Directors.

19. The Board of Directors shall be entitled to, at any time during a year, demand current performance reports from committees and determine deadline of preparation and submission of such a report.

20. The tasks of the Committee for strategic planning shall be determination and submission of recommendations to the Company’s Board of Directors related to determining the Company’s business priorities and strategy development.

21. The audit committee’s performance shall be aimed at assisting the Board of Directors in solving issues on external and internal audit, financial reporting, internal control and risk management, observance of legislation of the Republic of Kazakhstan, and other issues commissioned by the Board of Directors.

22. The tasks of the Committee for appointments and remunerations shall consist in making recommendations, to the Board of Directors, on appointments to the Board of Directors, chief executive officers of subsidiaries, dependant organizations and other employees of the Company, as well as systems of motivation and remuneration thereof according to the internal documents of the Company.

23. The Board of Directors and the Board of Directors’ committees shall have the right to use external experts and consultants’ services within the funds provided for such purposes in the Company’s budget for a relevant year.

4. Candidates to the composition of the Board of Directors

(sub-item 3 item 24 is set out in new wording, protocol EGSM № 49 as of 18.01.2013)

24. Candidates to the Company’s Board of Directors can be proposed from amongst:

1) shareholders – natural persons;

2) persons proposed for election to the Board of Directors as shareholders’ representatives;

3) natural persons that are not the Company’s shareholders and not proposed (not recommended) for election to the Company’s Board of Directors as a shareholder’s representative.

25. Candidates to independent director shall submit the following documents:

1) letter of consent according to annex 1 hereto;

2) ID card copy

3) notarized copies of diplomas, academic degrees, as well as licenses and/or patents, certificates, if any;

4) data on a candidate according to annex 2 hereto.

26. Candidates to the Board of Directors shall have relevant experience, knowledge, qualification, positive accomplishments required to perform their duties, unblemished reputation in business and industrial environment for organization of efficient Board of Directors’ performance in the interests of shareholders and the Company.

27. Qualification requirements to candidates to independent members of the Board of Directors shall be executed by the Committee for appointments and remunerations.

28. Qualitative characteristics of candidates to independent members of the Board of Dir5ectors of the Company shall not be less of qualification requirements provided for in annex 3 hereto.

29. The number of candidates in one application shall not exceed the number of the Board of Directors members provided for in the Company’s Charter and this Provision.

30. Nomination applications shall be executed in writing, by shareholders and persons entitled to be elected to the Board of Directors, and sent to the Management Board’s location or directly to the Chairman of the Board of Directors.

31.The applications for nomination of a candidate to the Board of Directors (including the case of self-nomination) shall contain the following:

1) family name, first name, patronymic, date of birth, education background, place of employment, and positions in organizations (including elective positions) during the last 5 (five) years;

2) identification card data;

3) information on the number and category of shares (shares of participation) held by candidate in commercial organizations, and data on his/her affiliated persons;

4) family name, first name, patronymic (official name for legal entities) of a shareholder(s) who nominates the candidate, the number and category of the Company shares owned by them;

5) data on addresses and contact telephone numbers;

6) other information proving qualification and experience of the candidates.

32. The Board of Directors, based on recommendations of the Committee for appointments and remunerations of the Board of Directors, shall include candidates’ names in the voting list for the Board of Directors’ election.

The Board of Directors shall have the right to reject to put the candidates’ names on the bulletin for election to the Board of Directors in the event:

1) the application is incomplete according to item 28 hereof;

2) candidate fails to meet requirements provided for in legislation of the Republic of Kazakhstan, the Company’s Charter, and items 23, 24 and 36 hereof.

33. The lists of independent director candidates shall be attached by candidate assessment lists filled in by members of the Committee for appointments and remunerations of the Board of Directors by using the standard form in Annex 4 hereto.

34. The motivated decision of the Board of Directors to reject to put the candidate’s name on the bulletin for election to the Board of Directors shall be submitted to shareholder(s) or interested persons that have made the proposal within 10 (ten) business days upon the adoption of the motivated decision.

35. The decision of the Board of Directors on rejection to put the candidate’s name on the bulletin for election can be appealed at the General meeting of shareholders or brought into the court pursuant to legislation of the Republic of Kazakhstan.

5. Election of the Board of Directors’ members, terms of reference and termination thereof

36. Members of the Company’s Board of Directors shall be elected at the annual General meeting of shareholders and reelected at the extraordinary General meeting of shareholders in the event of early termination of terms of reference of previously elected members of the Company’s Board of Directors according to the order established by legislation of the Republic of Kazakhstan, the Company’s Charter and this Provision.

(item 37 is set out in new wording, protocol EGSM № 49 as of 18.01.2013)

37. At least thirty percent of the composition of the Company’s Board of directors should constitute independent directors.

38. When electing a director the Company’s shareholders shall be provided with as much information on a candidate to the position of director as possible including his/her biography, information on candidate’s relations with the Company (affiliation, cooperation, etc.) and any other information that enables shareholders to take an objective decision.

39. The Board of Directors shall specify each director, considered by it as an independent director, in its annual performance report submitted to the General meeting of shareholders as a part of the annual report of the Company. The Board of directors shall determine whether the director was independent in process of taking decisions, specify the grounds for admission of the director as independent by indicating the directors’ compliance with independence criteria under legislation of the Republic of Kazakhstan. The Board of Directors shall, inter alia, specify relations or circumstances for admission of the director as independent, if the director:

1) has been an employee of the Company or its subsidiary within the last five years;

2) was or is paid additional remuneration by the Company other than remuneration payable for performance of the Board of Directors’ duties;

3) occupied similar position in other organizations or bodies, has significant relations with other directors through such participation in other organizations or bodies;

4) represents shareholders or state bodies;

5) was a director over nine consecutive years except of the cases provided for herein.

(item 40 is complemented with the fifth paragraph, protocol EGSM № 49 as of 18.01.2013)

40. A person may not be elected as a member of the Board of directors if he/she:

1) has outstanding or overturned conviction in accordance with the procedure established by legislation;

2) was chairman of board of directors, CEO (chairman of the management board), deputy head, chief accountant of other legal entity at least one year prior to decision on compulsory winding-up or compulsory redemption of shares or conservation of other legal entity recognized as a bankrupt according to the established order. This requirement shall apply within 5 (five) years upon the date of decision on compulsory winding-up, or compulsory redemption of shares, or conservation of other legal entity recognized as a bankrupt according to the established order.

Legal entity shall not be a member of board of directors.

The member of the Board of directors is not entitled to transfer performance of duties entrusted upon him in accordance with the legislative acts of the Republic of Kazakhstan and\or the Company’s Charter to other persons.

41. Members of the Management Board, other than the Chairman, shall not be members of the Company’s Board of Directors. Chairman of the Company’s Management Board shall not be, at the same time, elected as the Chairman of the Company’s Board of Directors.

(item 42 is set out in new wording, protocol EGSM № 49 as of 18.01.2013)

42. Election of members of the Board of Directors shall be made by shareholders by cumulative voting with the use of bulletins of voting except for the case when there is only one candidate standing for one place in the Board of directors. Bulletin of voting should reflect the following columns:

1) list of candidates for the position of member of the Board of directors;

2) number of votes owned by the shareholder;

3) number of votes given by the shareholder for the candidate to the position of member of the Board of directors.

It is prohibited to enter to the bulletin for cumulative voting the options of voting “against” and “abstain”.

Shareholder is entitled to give the votes on the shares he\she holds to one 1 (one) candidate or divide the votes among several candidates to the Company’s Board of directors. Those candidates who received the maximum number of votes shall be considered as having been elected to the Board of Directors. If two or more candidates have received the equal number of votes, an additional voting shall be carried out with regard to these candidates by providing the shareholders with the bulletins of cumulative voting containing the name of the candidates who received the equal number of votes.

43. The persons elected as independent directors shall enter into Agreement with the Company pursuant to the standard form in annex 5 hereto.

44. Members of the Board of directors shall be elected for up to 3 (three) years. When a member of the Board of Directors is elected for a new term exceeding 6 (six) years, his/her candidature shall be a subject to a special consideration with the account of qualitative renewal of the Board of Directors’ composition. The same person shall not elected as the Board of Directors’ member for consecutive nine years but in exceptional cases he/she can be elected for more than nine years provided such person has been elected every year.

Elected directors shall allot enough time for carrying out their duties.

45. Upon decision of the General meeting of shareholders, powers of authorities of any member (all members) of the Company’s Board of Directors can be terminated early. Decision on the early termination of powers of authorities of the Board of directors’ members shall be taken by simple majority of voting shares of the Company at the General meeting of shareholders.

(complemented with item 45-1, protocol EGSM № 49 as of 18.01.2013)

45-1. In the event when during a calendar year a member of the Board of directors has attended less than 50% of the Board of directors’ meetings or submitted the bulletins on less than 50% of items set out for distant voting, the Board of directors is obligated to recommend to the General shareholders’ meeting to terminate his/her terms of reference ahead of schedule.

46. In the event of early termination of powers of authorities of the Board of directors’ member, a new member shall be elected by cumulative voting at the General meeting of shareholders. The powers of authorities of a new member of the Board of Directors shall expire along with the powers of authorities of the Board of Directors.

In case of early termination of powers of authorities of 3 (three) or more members of the Board of Directors, other members of the Board of Directors shall have the right of convening the extraordinary General meeting of shareholders to elect new composition of the Board of Directors according to legislation of the Republic of Kazakhstan and the Company’s Charter.

47. Term of office of the Board of Directors shall be 3 years and expire by the date of holding the General meeting of shareholders at which a new composition of the Board of Directors shall be elected.

48. A member of the Board of Directors terminates his/her powers of authorities at his/her own will at any time by written notification to the Company’s Board of Directors. The Board of Directors shall terminate powers of authorities of this member of the Board of Directors upon the receipt of such notification.

6. The Chairman of the Board of Directors

49. The Chairman of the Board of Directors shall manage the Board of Directors, organize the work and ensure performance efficiency thereof, hold meetings according to the order established by legislation of the Republic of Kazakhstan, the Company’s Charter and this Provision, as well as:

1) sign on behalf of the Company:

- labour contract with the Chairman of the Management Board that provides for the direct dependence of material incentives and responsibility of Chairman of the Company’s Management Board on the results of the Company’s performance and the Development Plan (Middle-term Business Plan) implementation;

- annual audit contract with audit organization of the Company;

2) propose a candidature to the position of the head of the Company’s Internal Audit Department;

3) prepare agenda for the Meeting of the Board of directors;

4) ensure the following;

- efficient performance of Board of directors’ members and constructive relations between them and the Management Board;

- efficient relations with shareholders and bring shareholders’ viewpoints to the Board of Directors’ attention;

- submission of accurate and reliable information to the Board of directors’ members in timely manner;

- provision of newly elected members of the Board of directors with entry program;

- provision of answers to shareholders’ questions;

5) discuss the Company’s development strategy with (principal) shareholders;

6) carry out other functions according to legislation of the Republic of Kazakhstan.

50. In the absence of the Chairman of the Board of Directors, his/her duties shall be performed by a member the Board of Directors.

7. Corporate Secretary

(the change has been introduced to item 51, protocol EGSM № 49 as of 18.01.2013)

51. Corporate Secretary is the Company’s employee who is not a member of the Board of Directors and/or the Management Board of the Company, appointed by and subordinated to the Company’ Board of Directors.

52. Corporate Secretary shall, in the ordinary course of his/her activity, control preparation of and holding the Company’s General meetings of shareholders and meetings of the Board of Directors, organize filing and ensure the Board of Directors’ documents turnover, the Board of Directors’ meetings convening and these meetings’ minutes keeping, submit required information to the Board of Directors’ members, and:

1) prepare documents for consideration at the Board of Directors’ meetings, prepare proposals on the date, time and place of holding the meeting, settle other issues associated with preparation of the meeting;

2) prepare and keep meetings’ protocols, voting bulletins and other documentation of the Board of Directors;

3) send requests to the Management Board, Internal audit department, independent auditor, appraiser and/or registrar of the Company on behalf of the Board of Directors and the Chairman of the Board of Directors;

4) verify whether the items included in the agenda of the Board of Directors’ meetings fall within the competence of the Board of Directors;

5) control implementation of decisions made by the Board of Directors and report on the process of implementation of such decisions at the Board of Directors’ meetings;

6) upon request of the Board of Directors, collect additional materials and provide such materials to the Board of Directors for consideration;

7) assist in process of induction of directors;

8) inform directors of new directions in corporate governance development and organize consultations on governance for directors;

9) provide coordinated and efficient cooperation of the Board of Directors’ members with shareholders, the Chairman of the Management Board, managing persons and employees of the Company with the aim to ensure efficient performance by the Board of Directors;

10) perform other duties provided for in this Provision and internal documents of Company.

53. Status, functions and other issues on activity of Corporate Secretary shall be determined by the Board of Directors by approving relevant Provision on Corporate Secretary.

54. Some functions of Corporate Secretary can be assigned, upon decision of the Board of Directors, to authorized divisions of the Company to ensure effectiveness of the Board of Directors’ activity.

8. Convocation of the Board of Directors’ meetings

55. The Board of Directors shall hold the meetings as it may be required, but at least six times in a year.

56. The meeting of the Board of Directors shall be convened on the initiative of its Chairman or the Company’s Management Board, as well as upon the request of any member of the Board of Directors, Internal Audit Department, auditor or any Company’s principal shareholder.

57. The initiator convening the meeting of the Board of Directors shall file the request on convening of the Board’s meeting, which should contain:

1) name of the initiator convening the meeting of the Board of Directors;

2) proposed agenda of the meeting including the motives for including the items in the agenda of the meeting;

3) proposed form of holding the meeting of the Board of Directors.

58. The initiator must attach to the request on convening the meeting of the Board of Directors the documentation necessary for discussion of the items stipulated by the agenda. The request on convening the meeting of the Board of Directors must be forwarded to the Chairman of the Board of Directors or to the Management Board.

59. The meeting of the Board of Directors shall be convened by the Chairman of the Company’s Board of Directors or by the Management Board within 10 (ten) working days upon the receipt of the convocation request. In the event the Chairman of the Board of Directors refuses to convene the meeting, the initiator shall have the right to apply to the Company’s Management Board that will have to convene the Board of Directors’ meeting within a 5 (five) working days upon the receipt of the request.

The meeting initiator shall attend the Board of Directors’ meeting.

60. In the event when the Chairman of the Board of Directors refuses to convene the meeting and approve the agenda of the meeting, the agenda of the meeting shall be drawn up by the Management Board that shall convene the meeting within the period provided for in the Company’s Charter and this Provision.

61. Corporate Secretary shall send to the Board of Directors' members written notification on the Board of Directors meeting containing date, time, venue and agenda of the meeting with agenda materials being attached.

62. The Board of Directors meeting agenda materials shall be sent to the members of the Board of Directors at least 10 (ten) working days prior to the Board of Directors meeting day.

63. With a view of taking decisions on the basis of sufficient and complete information the Board of Directors members shall be sent the following materials:

1) the meeting agenda signed by Chairman of the Board of Directors;

2) explanatory note to each item of the agenda with explanation of the draft of the decision being proposed signed by the Management Board Chairman or the Management Board member supervising the issue or a person initiating the meeting or including the issue in the meeting agenda according to the order established by laws of the Republic of Kazakhstan;