Corporate Governance and Ethics

Kazatomprom’s corporate governance system is primarily designed to increase the long-term value of the Company by building a high-performing and transparent business and maintaining reliable and effective relationships with shareholders and investors.

Corporate Governance Rating

Kazatomprom strives to comply with the best corporate governance practices. Its corporate governance system is rating annually, using methodologies developed by independent consultants and approved by Samruk-Kazyna JSC. Currently, we are working to ensure the compliance of the corporate governance system with an action plan approved by the Company’s Board of Directors in five areas:

• effectiveness of the Board of Directors and the Management Board
• risk management, internal control and audit
• ustainable development
• hareholders’ rights
• transparency

KPMG conducted an independent assessment of Kazatomprom’s corporate governance system in 2019. The Company was assigned `BBB` corporate governance rating.

Based on the assessment results, the Company has developed a 2020 action plan to improve its corporate governance system. The plan has been approved by the Audit Committee and adopted by a decision of the Board of Directors on 20 February 2020.

Plan performance reports have been submitted to the Audit Committee and the Board of Directors of NAC Kazatomprom JSC.

As the Company took the majority of actions under the 2020 plan, its corporate governance rating is expected to remain at the achieved level.

For more information, see the 2019 Integrated Annual Report.

Throughout 2020, Kazatomprom:

• updated the Guide for onboarding newly elected members of the Company’s Board of Directors
• held an onboarding procedure for a new member of the Board of Directors, where the Company made a presentation prepared in accordance with the recommendations of independent consultants, containing the industry overview, information on strategy, business risks, financial situation, key employees, and major projects of the Group
• updated Kazatomprom’s risk management and business continuity management documents
• updated the risk and control matrices, revised the risk appetite calculations, implemented the risk-oriented planning projects, and automated the process for data collection on realised risks
• analysed the types of reporting to enhance the transparency and improve content for stakeholders
• held training sessions, in strict compliance with quarantine restrictions, for the members of the Board of Directors and Management Board on topics relevant to the Company and its management

The assessment of the corporate governance system planned by the major shareholder, Samruk-Kazyna JSC, has been postponed until 2021. The findings will also be taken into account while preparing and implementing the corporate governance improvement plans.

Corporate Governance Structure

When building the organisational structure, Kazatomprom took into account the target business processes in all key areas of the Company’s operations, necessary to achieve the Group’s strategic goals and objectives. We have adopted the best international practices of peer companies in the uranium and nuclear industries while complying with the laws of the Republic of Kazakhstan and requirements of shareholders.

The key objectives of the Company’s corporate governance system are to increase the transparency of operations, maintain effective long-term relationships with shareholders and stakeholders, improve the corporate governance, ensure the transparency of the management, and reaffirm the Company’s commitment to good corporate governance standards.

The following principles lie at the heart of the system:

• protection of shareholders’ rights and interests
• effective management of the Company and the effective operation of the Board of Directors and the Management Board
• transparency and objectivity of Kazatomprom’s operations
• legality and ethics
• effective dividend policy
• effective human resources policy
• health and safety at work
• environmental protection
• settlement of corporate conflicts and conflicts of interest
• responsibility

Kazatomprom’s corporate governance structure⁵⁹

⁵⁹ The Company’s system of corporate governance bodies includes:

– the highest governing body, the General Meeting of Shareholders;

– the governing body, the Board of Directors, that reports to the General Meeting of Shareholders;

– the executive body, the Management Board, that reports to the Board of Directors;

– the Internal Audit Service, which is a body responsible for overseeing the Company’s financial and business operations, assessing the internal control and risk management, and advising on improvements to the Company’s operations (reports to the Board of Directors);

– Corporate Secretary, who is an employee of a joint stock company, not a member of the Board of Directors and (or) the Company’s executive body, and is appointed by, and reports to, the Board of Directors of the Company. The Corporate Secretary supervises the preparation and holding of meetings of the General Meeting of Shareholders and the Board of Directors of the Company, ensures the preparation of materials on agenda items of the General Meeting of Shareholders and materials for meetings of the Board of Directors of the Company, and controls access to them (reports to the Board of Directors);

– Compliance Service (reports to the Board of Directors);

– Office of the Ombudsman (reports to the Board of Directors).

Corporate Governance Code

The Corporate Governance Code⁶⁰ of the Company has been developed in accordance with the laws of the Republic of Kazakhstan, internal documents of Samruk-Kazyna JSC, and the Transformation Programme of Samruk-Kazyna JSC. The Code takes into account the corporate governance practices adopted in Kazakhstan and globally and sets out the principles lying at the core of the Company’s corporate governance system.

⁶⁰ The Corporate Governance Code is available on the Company’s official website at https://www.kazatomprom.kz/en/page/dokumenti

The Company considers that its corporate governance system complies with the key listing rules of major stock exchanges and the fundamental/primary corporate governance principles recognised by the global economic community (e.g. the OECD Principles of Corporate Governance).

Compliance with the Corporate Governance Code

In line with the Corporate Governance Code, the Office of the Corporate Secretary analysed compliance with the principles and provisions of the Code across the Company in 2021. According to the findings, 87% of the provisions of the Code are fully complied with, 3% are partially complied with, and 0% are not complied with. The remaining 10% of the provisions do not apply to the Company, as they explain the role of the Fund as a national managing holding company and regulate the relations between the Fund and the Government of Kazakhstan. For more information about the Code compliance audit findings 2020, see the compliance report on the Company’s website.

Adherence to the AIX corporate governance principles

AIX has the general principles of corporate governance in place for listed companies. The Corporate Governance Code is largely consistent with such principles. In addition, the Company’s Code contains certain provisions to ensure the compliance with Samruk-Kazyna’s goals. Any initiatives of the Group that relates to activities outside its core business are subject to review and verification by the Board of Directors chaired by an independent director.

Compliance with KASE’s corporate governance principles

In 2013, KASE adapted the International Finance Corporation’s (IFC) corporate governance scorecard, allowing joint stock companies listed on KASE to use this tool to assess the Company’s corporate governance level. Assessed against the six categories, the Company mostly meets the criteria set out in the scorecard.

Differences between the Company’s Corporate Governance Code and the UK Corporate Governance Code ⁶¹

The main differences between the Corporate Governance Code and the provisions of the UK Corporate Governance Code are described below.

⁶¹ The differences are indicated on the basis of a literal comparison of the contents of the Code of Corporate Governance of the Company and the UK Code of Corporate Governance. However, such differences do not imply in practice complete non-compliance with the provisions of the UK Code.

• under the UK Corporate Governance Code, when 20% or more of votes have been cast against the board recommendation for a resolution, the Company should explain, when announcing voting results, what actions it intends to take to consult shareholders to understand the reasons behind the result. An update on the views received from the shareholders and actions taken should be published no later than six months after the shareholder meeting. The board must then provide a final summary in the annual report and, if applicable, in the explanatory notes to resolutions at the next shareholder meeting, on what impact the feedback has had on the the board’s decisions

• the Corporate Governance Code of the Company obliges the Chair of the Board of Directors to build a constructive dialogue between Board members, major shareholders, and the Company’s executive body. At the same time, the Chair of the General Meeting of Shareholders should strive to ensure that shareholders receive answers to questions directly during meetings. If a question is too complex to allow for an immediate response, the individual (s) to whom the question was addressed should provide a written answer as soon as possible after the conclusion of the General Meeting. In addition, major shareholders may hold meetings with the Chair and Board members to discuss development strategy issues, elect the head of the executive body, and address other elements that impact any growth in long- term value and the sustainable development of the Company. Such meetings are pre-planned and held following approved procedures

• the UK Corporate Governance Code states that non-executive directors have a prime role in appointing and removing executive directors. Non-executive directors should scrutinise and hold to account the performance of management and individual executive directors against agreed performance objectives. The chair should hold meetings with the non-executive directors without the executive directors present

• the Company’s Corporate Governance Code states that candidates for the head of the Company must be approved by the President or the Presidential Administration of the Republic of Kazakhstan (if the Company is on a list approved by a Decree of the President of the Republic of Kazakhstan), the Management Board of Samruk- Kazyna, the Nomination and Remuneration Committee of the Board of Directors of Samruk-Kazyna, and the Chairman of the Board of Samruk-Kazyna

• the UK Corporate Governance Code sets forth the main responsibilities of the company’s nomination and remuneration and audit committees and also states that a description of the main activities of these committees should be included in the company’s annual report

• the Company’s Corporate Governance Code contains no such requirement

• the UK Corporate Governance Code prohibits the Chair of the Board from being a member of the audit committee

• the Company’s Corporate Governance Code contains no such restriction

• under the UK Corporate Governance Code, in annual and half-yearly financial statements, the board should state whether it considers it appropriate to adopt the going concern basis of accounting in preparing them, and identify any material uncertainties to the company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements

• the Corporate Governance Code of the Company contains no such requirement

• the UK Corporate Governance Code stipulates that a majority of members of the nomination committee should be independent non-executive directors. The chair of the board should not chair the committee when it is dealing with the appointment of their successor

• The Company’s Corporate Governance Code contains no such requirement

• under the UK Corporate Governance Code, where a remuneration consultant is appointed, this should be the responsibility of the remuneration committee. The consultant should be identified in the annual report alongside a statement about any other connection it has with the company or individual directors. Independent judgement should be exercised when evaluating the advice of external third parties and when receiving views from executive directors and senior management

• the Corporate Governance Code of the Company contains no such requirement

• the UK Corporate Governance Code stipulates that remuneration schemes should promote long-term shareholdings by executive directors that support alignment with long-term shareholder interests. In addition, there are clarifications regarding the terms of contracts concluded with the directors of the company

• the Corporate Governance Code of the Company contains no such requirement

General Meeting of Shareholders

Respect for shareholders’ rights is essential to Kazatomprom’s corporate governance. The Company treats all shareholders equally, including minority shareholders, regardless of their shareholdings.

Results in 2020

On 18 May 2020, the Annual General Meeting of Shareholders was held in person at the Company’s offices. Because of the global COVID‑19 pandemic, the independent members of the Company’s Board of Directors joined the meeting via conference call.

The following issues were on the agenda:

• approval of the 2019 annual financial statements of NAC Kazatomprom JSC (separate and consolidated)
• approval of Kazatomprom’s 2019 net income distribution procedure, adoption of the decision about the payment of dividends on ordinary shares and approval of the size of dividends per one ordinary share in NAC Kazatomprom JSC for 2019
• information on shareholders’ appeals against the actions of NAC Kazatomprom JSC and its officials and the results of their consideration
• information on the size and structure of remuneration payable to the members of the Board of Directors and the Management Board
• the composition of the Board of Directors
• approval of restated Regulations on Kazatomprom’s Board of Directors
• approval of the restated Methodology for establishing the value of shares at redemption by Kazatomprom

On 27 July 2020, the Company held an extraordinary General Meeting of Shareholders in absentia. It was convened at the initiative of the Company’s Board of Directors at the request of the majority shareholder, Samruk-Kazyna JSC. That meeting approved a reduction in the remuneration payable to the Company’s independent non-executive directors as a consequence of economic considerations related to the COVID‑19 pandemic.

The next General Meeting of Shareholders is scheduled for 19 May 2021. Full details of the meeting will be given in the Notice of Shareholders’ Meeting to be published 1 April 2021. The shareholders who are unable to attend are advised to vote by proxy, as will be set out in the Notice. All documents related to the General Meeting of Shareholders will be available on the Company’s website in the Investors section.

Information for shareholders

Website

Information about the Company, including description of operations, press releases, annual and interim reports, is available on the corporate website

Shareholders’ Requests

The shareholders of the Company may file requests and enquiries about absentee voting, dividends, notification of changes in personal details, and other such matters with the Company’s registrar/depository:

• for holders of ordinary shares: Central Securities Depository JSC, 28, Samal‑1 district, Almaty; phone: +7 (727) 355 47 61
• for holders of Global Depositary Receipts (GDRs): Citibank, N.A., 388 Greenwich Street, New York, NY 10013, United States, phone: +1–212–816–6622 / +1–917–533–7887

Percentage of issued shares issued and free float

The total number of issued shares in Kazatomprom, including GDRs, is 259,356,608, with the free float of shares/ GDRs⁶² being now 25%, i.e. 64,839,152. Samruk-Kazyna JSC holds 194,517,456 shares, or 75%, in Kazatomprom.

⁶² The Company’s shares and GDRs are listed on Astana International Exchange (AIX) and the GDRs are listed on the London Stock Exchange (LSE). One GDR corresponds to one ordinary share.

Kazakhstan’s credit ratings over the past five years

Information about Listing

As part of the Comprehensive Privatisation Plan 2016-2020 approved by the Government of Kazakhstan, it was decided to sell up to 25% of the Company’s shares through IPO.

In November 2018, Samruk-Kazyna JSC made the initial public offering (IPO) for 14.92% of Kazatomprom shares owned by the Fund on two stock exchanges, AIX exchange (shares and global depositary receipts) and the London Stock Exchange (global depositary receipts).

In September 2019, Samruk-Kazyna JSC made a secondary offer of GDRs on AIX and LSE, further increasing the free float by 3.8%.

In 2020, Samruk-Kazyna JSC completed a successful secondary placement of Kazatomprom’s equity on the London Stock Exchange and Astana International Financial Centre exchange. The additional offering boosted the total number of free float to 25%.

Listing data

Board of Directors

The Board of Directors oversees the strategy and is authorised to make the decisions on all aspects of the Company’s activities, except for those matters that are reserved to the General Meeting of Shareholders under the Joint Stock Companies Act, the Sovereign Wealth Fund Act, other legislation of Kazakhstan and the Company’s Articles of Association. The Board of Directors operates in accordance with the principles set out in the Articles of Association, Corporate Governance Code and the Regulations on the Board of Directors.

The Members of the Board of Directors are elected by resolution of the General Meeting of Shareholders for a term of up to three years and may be re-elected for another term of up to three years if their performance is good. A period of election to the Board of Directors that exceeds six consecutive years is subject to special consideration. Exceptionally, the election for more than nine years is permitted, but an independent director may not be elected to the Board of Directors for more than nine consecutive years. The election should be held annually, with a detailed explanation of the need to elect this candidate to the Board of Directors.

A person nominated (recommended) for election to the Board of Directors as a shareholder representative or a person, who is not a shareholder and has not been appointed as a shareholder representative, is eligible for election as a member of the Board of Directors. There should be at least six members of the Board of Directors, with at least 30% of the Board of Directors being independent directors.

The Board of Directors operates in terms of its annual work plan and meeting schedule developed in line with the principles of efficiency and effectiveness and meet at least six times a year. If necessary, the Board of Directors may consider matters not included in its work plan.

Composition of the Board of Directors

As of 31 December 2020, the Board of Directors consisted of seven directors, including three independent directors. The Board of Directors is chaired by an independent director. The description of criteria for compliance with the standards of independence for members of the Board of Directors is given in the Articles of Association and Regulations in the Board of Directors, which are available on the Company’s website.

The members of the Board of Directors do not hold any shares in the Company or equity interests in affiliates, nor do they own/possess any shares/equity interests in the Company’s suppliers and competitors.

On 18 May 2020, the General Meeting of the Shareholders resolved to terminate early the term of office for Jon Dudas as an Independent Non-Executive Director and Chairman of the Company’s Board of Directors with effect from 5 December 2019 and elect Neil Longfellow as the Chairman of the Company’s Board of Directors. Marc William Kasher was elected to the Company’s Board of Directors by this resolution. The term of office for the Company’s Board of Directors is three years since the date of this resolution.

For more information about the powers for the Company’s Board of Directors, see the 2019 Integrated Annual Report.

Changes in the composition of the Board of Directors in 2020

The Company’s Board of Directors adopted a decision on 26 August 2020 to establish the composition of the committees and distribute the workload equally among the members of the Board of Directors, particularly among the independent directors. As a result, the workload related to the committee representation was divided among independent directors.

Activities of the Board of Directors

In 2020, the Board of Directors approved the Company’s internal and planning documents and made decisions on the conclusion of related-party transactions. Important decisions were also made to improve corporate governance, risk management, and internal controls.

Independence of the Board of Directors

Attendance of meetings by members of Board of Directors in 2020

Evaluation of Board of Directors’ performance

The performance of the Board of Directors is subject to external independent evaluation once every three years. No assessment of the Board of Directors’ performance was carried out as a part of the general corporate governance diagnostics in 2020. Prior to that, an independent external consultant evaluated the Board of Directors’ performance in 2018. There was no need for a separate internal evaluation after this assessment.

Engaging independent directors

When selecting independent directors, the Company follows the Law of the Republic of Kazakhstan On Joint Stock Companies, the Company’s Articles of Association, and the Rules for Selection of Independent Directors at Samruk- Kazyna JSC, which define the procedures for searching and selecting the candidates on a competitive basis for the positions of independent directors, as well as establishing the rules for preliminary qualification assessment of candidates by the Nomination and Remuneration Committee.

In accordance with the Company’s Corporate Governance Code, the Board has established the independence of the directors and believes that Neil Longfellow, Russell Banham, and Marc Kasher are independent by nature and in decision-making. The Board has determined that there are no relationships or circumstances, which have or could have a significant impact on the independent decisions of these directors.

Committees of the Board of Directors

The committees of the Board of Directors are an important element of the Board of Directors at any company. Thanks to the principal work done by the Committees of Board of Directors, namely the preliminary consideration and elaboration of the most important matters about the Board’s competence, and preparation of recommendations for decision-making on these matters, the Board of Directors is able to manage successfully and adapt quickly to the ever-changing environment and comply with fundamental principles of corporate governance. Thanks to the Company’s IPO and positive changes in the price of shares since Kazatomprom went public, we have seen an all-round increase in interest in our operations. These factors raise the importance of the committees, as they have their own specialisation and the committee members focus more on development strategy, international cooperation and investment promotion.

The Board of Directors has four committees:

The Committees are accountable to the Board of Directors in accordance with the authority granted to them by the Board of Directors and the relevant Regulations on the Committees. Being advisory and consultative bodies of the Company’s Board of Directors, the Committees have been established to make in-depth consideration of issues that fall within the competence of the Board of Directors. The Committees of the Board of Directors are chaired by independent directors.

Performance of the Board of Directors committees in 2020

Production Safety (HSE) Committee

Composition and number of the Committee’s meetings

In the reporting year, the Committee met five times in person and considered 23 issues.

Determining the number of members and the term of office for the Committee members, electing the Committee’s Chairman and members and deciding on the early termination of their powers are the matters reserved for the Company’s Board of Directors.

For more information about the Committee’s role, see the 2019 Integrated Annual Report.

Issues considered by the Committee in 2020

• Kazatomprom’s Corporate Social Responsibility and Sustainability Report for 2019
• report on the implementation of the Action Plan for the social and working conditions of the production staff based on the 2019 results
• the Public Control occupational safety policy improvement initiative and consideration of Kazatomprom’s Corporate Sustainable Development Policy
• review of 2020 Quarterly Occupational Safety Status Reports and 2020 Quarterly ESAP Implementation Status Reports

Audit Committee

Composition and number of the Committee’s meetings

* Joined the Committee on 18 May 2020

In the reporting year, the Committee held nine meetings in person and addressed 98 issues.

Determining the number of members and the term of office for the Committee members, electing the Committee’s Chairman and members and deciding on the early termination of their powers are the matters reserved for the Company’s Board of Directors.

Consisting entirely of independent directors, the Committee is chaired by Russell Banham.

Issues considered by the Committee in 2020

In 2020, the members of the Committee reviewed the regular reports of the Internal Audit and Compliance Service, as well as the risk management and hotline performance reports on a quarterly basis.

For more information about the Committee’s role, see the 2019 Integrated Annual Report.

Strategic Planning and Investment Committee

Composition and number of the Committee’s meetings

* Joined the Committee on 18 May 2020

In the reporting year, six meetings of the Committee were held in person to consider 27 issues.

Determining the number of members and the term of office for the Committee members, electing the Committee’s Chairman and members and deciding on the early termination of their powers are the matters reserved for the Company’s Board of Directors.

Independent directors make up the majority of the Committee.

Issues considered by the Committee in 2020

In 2020, the members of the Committee reviewed the reports on Kazatomprom’s Transformation Programme, and Kazatomprom’s Management Board reports on the implementation of major investment projects on a quarterly basis.

For more information about the Committee’s role, see the 2019 Integrated Annual Report.

Nomination and Remuneration Committee

Composition and number of the Committee’s meetings

* Joined the Committee on 18 May 2020

In the reporting year, the Committee held nine meetings in person, addressing 58 issues.

Determining the number of members and the term of office for the Committee members, electing the Committee’s Chairman and members and deciding on the early termination of their powers are the matters reserved for the Company’s Board of Directors.

The Committee has been chaired by Marc Kasher since 18 May 2020.

Issues considered by the Committee in 2020

In 2020, the members of the Committee reviewed regular reports of the Ombudsman and the Corporate Secretary on a quarterly basis.

For more information about the Committee’s role, see the 2019 Integrated Annual Report.

Management Board

The Management Board is an executive body of Kazatomprom, which carries out its activities in accordance with the legislation of the Republic of Kazakhstan, Articles of Association, Corporate Governance Code, and the Regulations on the Management Board. These documents outline the role and accountability of the Management Board, as well as the rights and responsibilities of the Management Board members.

As an executive body, the Management Board manages the day-to-day operations of the Company. It makes decisions on any matters of the Company’s business that are not reserved by law and/or the Company’s Articles of Association for other bodies and officers of the Company.

The matters reserved for the Management Board include:

• approval of the Company’s internal documents
• appointment of heads of branches and representative offices
• development and implementation of the Company’s business strategy and budget
• adoption of the executive business decisions
• implementation of decisions made by the Board of Directors and the General Meeting of Shareholders

The members of the Management Board may be representatives of the Company’s shareholders and employees, who are not shareholder’s representatives and are appointed and dismissed by the Board of Directors. The size and the term of office of the Management Board shall be determined by the Board of Directors. The Management Board shall consist of at least five members.

Composition of the Management Board

In 2020, the composition of the Management Board remained unchanged since its approval by the Board of Directors on 26 June 2019. The Management Board consisted of seven members.

Composition of the Management Board

Attendance of the Management Board’s in-person meetings by members in 2020

⁶³ Birzhan Duisembekov has been on study leave since 09 December 2020.

According to Regulations on Kazatomprom’s Management Board approved by the Company’s Board of Directors on 26 June 2019, the Management Board may make decisions in the following ways:

• by voting in person (in-person meetings)
• by absentee voting (without holding a meeting)
• by mixed voting

Performance of the Management Board in 2020

In the reporting period, the Management Board held 40 faceto- face meetings and considered 783 issues, including:

• 475 issues were submitted for consideration and approval by the Board of Directors of Kazatomprom. They included: approval of the Company’s internal and planning documents; conclusion of related-party transactions; decisions on the transfer of subsoil use rights; acquisition/disposal of stakes in the authorised capital of other legal entities; preliminary approval of annual financial statements, and preparation of proposals on dividend distribution. The issues also included the Management Board’s reports: on risk management; on the status of occupational safety, on the implementation of Kazatomprom’s Business Plans, on the implementation of the corporate governance improvement action Plans, on the implementation of major investment projects, on the conclusion of related-party transactions considered by Kazatomprom’s Management Board; on implementation of Kazatomprom’s Asset Restructuring Plan; the approval of amendments to current subsoil use contracts; approval of key performance indicators for the Chairman and members of the Management Board for 2021; the approval of the register, risk map and risk appetite of NAC Kazatomprom JSC for 2021; the approval of the organisational chart at Kazatomprom’s central office and the total headcount; the approval of limits of balance-sheet and off-balance sheet liabilities in regard to tier 2 banks for the group of Kazatomprom’s enterprises that exceed the internal limits of NAC Kazatomprom JSC; the adoption of decisions and establishment of the Company’s position as the Sole Shareholder (Participant) of the subsidiaries and as one of the shareholders/participants of the legal entities in which Kazatomprom is not the Sole Shareholder (Participant) for subsequent voting by the Company’s authorised representatives at the general meetings of shareholders (participants) on certain issues of the operations of the subsidiaries, associates and joint ventures
• decisions were made on the conclusion of 83 related-party transactions of which the parties were representatives or intermediaries of the Company’s affiliates. The decisions on the conclusion of the related-party transactions were taken by the Management Board in accordance with Article 21 of the Law of the Republic of Kazakhstan No. 550 dd. 1 February 2012 IV On the Sovereign Wealth Fund, Articles 64, 71 of the Law of the Republic of Kazakhstan No. 415-II dd. 13 May 2003 On Joint Stock Companies, and clause 6 of the Rules for concluding transactions between organisations under the umbrella of Samruk-Kazyna, where the Law of the Republic of Kazakhstan On Joint Stock Companies sets special conditions for conclusion of such transactions as approved by the decision of the Board of Directors of Samruk-Kazyna on 27 April 2009 (Minutes No. 18)
• 54 transactions where Kazatomprom alienated and/or acquired property with the value being less than 10% of the total value of Kazatomprom’s assets, as well as decisions made by the Company’s Management Board in accordance with Article 180. 2 of Law of the Republic of Kazakhstan No. 413-IV dd. 1 March 2011 On State Property
• 23 issues were decided to establish the Company’s position as a shareholder (participant) of legal entities in which NAC Kazatomprom JSC is not the Sole Shareholder (Participant) for the subsequent voting by the Company’s authorised representatives at the general meetings of shareholders of such entities (voting on the operations of Baiken-U LLP, JV SKZ Kazatomprom LLP / SSAP LLP, and Uranium Enrichment Centre JSC)
• 46 decisions to approve Kazatomprom’s internal regulatory documents. They included: Kazatomprom’s Information Security Strategy 2019-2028; Regulations for the Talent Management at NAC Kazatomprom JSC; Kazatomprom’s Stakeholder Map; the Management of Kazatomprom’s Subsidiaries, associates and joint ventures Policy; Guidelines for Operational Accounting during ISR Mining of Uranium; R&D Management Policy of NAC Kazatomprom JSC; Guidelines for the calculation of the economic effect from the implementation of the energy saving and energy efficiency measures; Guidelines for Procurement Procedures at Kazatomprom; Procedures for consideration and the arrangement of pilot tests of new technologies, equipment, materials, and chemical reagents for the mining and processing of uranium and associated elements of rare metals and rare earth metals; Regulations on Green Finance Committee of NAC Kazatomprom JSC; Procedures for the development, approval, monitoring, and implementation of the digital transformation portfolio projects and measures at Kazatomprom; Regulations on Kazatomprom’s Staff Training and Development, Regulations on Procurement Category Strategies for 2021, Regulations on the IT Architectural Committee of Kazatomprom, as well as the updating of some internal regulatory documents of NAC Kazatomprom JSC
• 102 decisions on other matters, including the approval of limits of balance-sheet and off-balance sheet liabilities in regard to tier 2 banks for the Kazatomprom Group, a list of second-tier banks where Kazatomprom can deposit its temporary redundant funds; Regulations on the Risk Management Committee of Kazatomprom’s Board of Directors; the Implementation Plan for NAC Kazatomprom JSC Development Strategy 2018-2028; decisions on the procurement of services, etc.

Number of issues considered by the Company’s Management Board in 2019-2020

Remuneration

In accordance with the Company’s Articles of Association, the remuneration of the Board of Directors’ members is established by the General Meeting of Shareholders, while the remuneration of the Chairman and members of the Management Board is established by the Board of Directors.

The procedure, terms and conditions of remuneration payment are outlined in the Company’s Management Remuneration, Bonus, and Social Support Policy adopted on 28 June 2017.

In accordance with the Law of the Republic of Kazakhstan On Joint Stock Companies and a decision of the General Meeting of Shareholders of the Company, independent members of the Board of Directors receive remuneration and reimbursement against expenses related to their roles.

In 2020, members of the Management Board and independent directors of the Board of Directors at Kazatomprom received the remuneration of KZT 1,205,416,000 in total (one billion two hundred and five millions four hundred sixteen thousand tenge) before taxes and other obligatory payments.

Employment contracts with senior managers

At the Company’s group companies, the employment contracts with senior managers are made for a fixed term. Under such contracts and in accordance with internal regulations approved by the authorised bodies of the companies, bonuses or other forms of remuneration are paid to the senior management in addition to their regularly paid salaries.

Each senior manager shall sign an individual employment contract that is fully compliant with the laws of Kazakhstan, including the Labour Code. The terms and conditions of the agreements usually include a five-day 40-hour working week, an eight-hour working day, annual leave of 30 calendar days, insurance by the Company against life and health risks that arise from the performance of their duties, and medical insurance.

Risk Management and Internal Control

Risk Management System

Kazatomprom has an effective risk management system in place to model and assess business risks. Accurate and timely risk identification, assessment, monitoring and response enable the Company to make effective decisions at all levels of management and to ensure the achievement of its strategic goals and key performance indicators.

In 2020, as part of the coordination of efforts to ensure the property of subsidiaries, associates and joint ventures, the Company approved its 2021-2022 Corporate Property Insurance Programme for Kazatomprom’s subsidiaries, associates and joint ventures. The Programme covered 11 mining entities and Trade and Transport Company LLP. We earmarked the funds for the property insurance of subsidiaries, associates, and joint ventures in the 2021 budgets of subsidiaries, associates and joint ventures. The Programme is planned to be launched in February 2021.

In 2020, the Company updated the Kazatomprom Risk Management Policy to harmonise it with the Risk Management and Internal Control Policy of Samruk-Kazyna JSC, as well as the international standards and best practices in risk management.

Furthermore, in 2020, the Company developed the Guidelines approved by Kazatomprom’s Management Board for the counterparty risk management in the sale of uranium products.

In addition, the Company and its subsidiaries, associates and joint ventures continued to operate a business continuity management system, which envisages a business continuity testing plan on an annual basis. We updated the Business Continuity Rules in June 2020 and tested the Company’s business continuity plans in September-October.

Plans for 2021:

• promote a risk culture across the Company
• update internal regulations on business continuity through the introduction of emergency drills and exercises
• digitise technological drilling data and make better use of the potential of GPS sensor data as part of the risk-based planning and management project
• implement and promote the principles of segregation of duties (SoD) within SAP Governance, Risk and Compliance, Access Control (GRC AC)

For more details on the Company’s approach to risk management, see the 2019 Integrated Annual Report.

Key risks and risk management measures

Under the COSO methodology, all of the Company’s identified risks fall into five main categories: strategic, financial, operational, investment, and legal. The registers and risk maps of subsidiaries, associates and joint ventures are developed and approved on an annual basis. Kazatomprom’s risk map is divided into zones of impact and likelihood.

According to the Company’s Risk Register, 25 risks were identified for 2020::

Red zone - 4 risks

Orange zone - 6 risk

Yellow zone - 10 risks

Green zone - 5 risks

Kazatomprom Risk Map 2020

Kazatomprom Risk Map 2020

The Company’s main risks and mitigation measures

Reports on the implementation of preventive measures (as part of the risk register) are generated on a regular basis.

The level of risk appetite is determined and approved by the Board of Directors on an annual basis. In order to control the process of preventing possible negative financial consequences and possible reduction of the Company’s value, the tolerance levels are defined for all risks, and the limits are set for the second-tier banks.

In addition, Kazatomprom has introduced the routine analysis and assessment of risks in investment projects, as well as in other issues submitted by the Company’s enterprises for consideration by their governing bodies.

The Company’s senior management is continuously and directly involved in risk management. The Risk Management Department generates the quarterly risk management reports for the Management Board (and the Board of Directors), disclosing information on realised risks, preventive and reactive measures, which are taken to minimise the risks, projected risks and the status of financial risks.

Internal Control System

Our internal control system focuses on risk prevention in three key areas, including financial and management reporting, compliance with legal and internal regulations, and improving operational efficiency.

The Company’s internal control system seeks to build a management system capable of responding quickly to process risks, controlling the core and supporting processes and day-to-day operations. Relying on the COSO Internal Control — Integrated Framework standard, it consists of five interdependent components:

• control environment
• risk assessment
• control procedures
• information and its transmission
• monitoring

The rules of Kazatomprom’s internal control system are available on the Company’s website.

As part of the implementation of SAP as the Group’s ERP system, various initiatives were undertaken in 2020 to implement appropriate segregation of duties and access controls. Consultants were engaged to implement a pilot project to develop appropriate rules for separation of duties and to configure SAP for the procurement process. The work will continue in 2021-2022.

As a part of its internal control system, Kazatomprom takes the following ongoing measures:

• testing the operational efficiency of the business processes controls at the Company’s structural units
• testing the controls of the Company’s financial reporting processes
• assessing the internal control systems at subsidiaries, associates and joint ventures

Product Quality Assurance

According to Kazatomprom’s development strategy, ensuring product quality is one of the Company’s top priorities. The quality of production is based on a set of components that are interrelated and constitute a Quality Infrastructure (QI).

In practice, the Company takes a consistent approach to the management and development of the quality infrastructure based on the synergy of its constituent elements: technical regulation, standardisation, metrology, testing, quality management, certification, and accreditation.

Technical regulation, standardisation, metrology

As part of efforts to build the Business Process Architecture under Kazatomprom’s Transformation Programme, the Company developed a concept for improving the management of Kazatomprom’s internal regulatory documents (IRD). In line with the Concept and the Company’s efforts to implement the Paper-free KAP policy, we developed and approved standard ST NAC 1.7-2020, Guidelines for Internal Regulatory Documents Management, and launched a project, Kazatomprom’s Internal Regulatory Documents in the eKAP information system. More than 500 internal regulatory documents, including 75 standards of Kazatomprom’s corporate standardisation system, were uploaded to the eKAP e-database.

With a view to developing the calibration of measuring instruments, reducing the financial burden, and optimising the allocation of resources in production at mining companies, the Company developed corporate standard ST NAC 2.3-2020, Metrological Asset Management Methodology, and a uniform scheme of measurements subject to state metrological control.

Testing, quality management, certification, accreditation

Following the modern trends of Industry 4.0, NAC Kazatomprom JSC is widely introducing new information technologies at its enterprises. One of the systems that are currently being implemented is the Digital Mine Information System (DMIS), which includes a LabWare-based LIMS (Laboratory Information Management Subsystem). LIMS is designed to obtain reliable data from test (measurement) results and optimise the information to use it to control the production processes. LIMS was implemented in four laboratories of IVT-Zerde branch of High Technology Institute LLP (enterprises of Kazatomprom- SaUran LLP, Stepnoye RU, RU-6 LLP, and LLP «MC «ORTALYK» ).

The expected effect from the introduction of LIMS will be fully evident after the continued use and integration of LIMS into the operations of uranium mining companies. The Company made a plan for replicating the LIMS system in testing laboratories. At the same time, we will work to provide laboratories of subsidiaries, associates and joint ventures with measurement methods, standard samples, intra-laboratory control, and inter-laboratory comparative tests.

To enhance the status and role of proficiency testing (PT) participants, the accredited testing laboratories, in ensuring the reliability of measurements to international standards (currently, Kazakhstan has no PT provider for laboratories that perform the tests of uranium-containing materials), it is planned to conduct the accreditation of a PT provider for compliance with GOST ISO/IEC 17043-2013 at the High Technology Institute.

The Company supports the quality management systems of its subsidiaries, associates, and joint ventures that are ISO 9000 certified, as well as the accredited laboratories (testing, verification, and calibration) certified to ST RK ISO/ IEC 17025.

We have acquired international standards to meet the requirements of end-users’ product quality under export contracts: ASTM 20 «Standard Specifications for Uranium Ore Concentrate», ASTM C996-15 «Standard Specifications for Uranium Hexafluoride Enriched Below 5% (U-235)», ASTM C787-15 «Standard Specifications for Uranium Hexafluoride Enrichment», and ASTM C1052-14 «Standard Practices for Mass Sampling of Liquid Uranium Hexafluoride». The Company updated its requirements for export preparation and shipment of U3O8 by adding requirements for securing TUK 44/8 casks inside 20-foot containers to the ST NAC 25-2019 standard «Requirements for the preparation of Kazatomprom’s finished products for export».

Internal Audit

The Company has an independent Internal Audit Service (hereinafter referred to as IAS), which reports directly to the Board of Directors. The Board of Directors determines the composition of the IAS, the remuneration of its staff, and approves the internal audit policies and procedures, as well as the annual audit plan and budget.

The Internal Audit Service underwent an external independent assessment in 2020. According to the assessment, the IAS is 84% compliant with international internal auditing standards. The report was reviewed by the Audit Committee and the Board of Directors.

The IAS has developed a plan for further improvement and will seek to improve its compliance with international standards.

Key IAS results in 2020:

• the targets under the annual audit plan were 100% met despite the switch to remote auditing
• the average degree for the implementation of the IAS recommendations was around 97% across the Group
• no facts have been recorded that adversely affected the independence or individual objectivity of the internal auditors
• the impossibility to visually inspect individual audit areas because of the quarantine restrictions were major constraints for IAS in 2020
• the management, Audit Committee, and the Board of Directors reviewed the IAS reports on a quarterly basis

External audit

The Extraordinary General Meeting of Shareholders held on 4 December 2019 decided to engage Pricewaterhouse- Coopers LLP as an auditor to audit the IFRS consolidated and separate financial statements of NAC Kazatomprom JSC for 2020, 2021, and 2022.

The total auditor’s fee for audit services under the audit contract for 2020-2022 is KZT 908,005,400 (nine hundred eight millions five thousand four hundred), incl. VAT.

As part of the audit for 2020-2022, the auditor holds a workshop on changes in the International Financial Reporting Standards for Kazatomprom once a year. In addition, five employees of the Company will attend training on ACCADipIFR and CIMA certifications under the audit contract with PricewaterhouseCoopers LLP.

Engaging an Auditor to provide the services that may affect its independence requires prior approval of the Audit Committee. For any such potential services, an audit firm must provide Kazatomprom with explanations of reasons why the approval would not compromise the auditor’s independence. In accordance with the Company’s Policy on Audit Organisations Engagement, the total fee for non-audit services rendered to the Group is capped at no more than 70% of the average fee paid for the audit of the Group during the last three consecutive financial years. The decisions made by the Audit Committee in relation to non-audit services provided by the audit firm shall be communicated to the Board of Directors for information.

Corporate Ethics and Compliance

Kazatomprom has a zero-tolerance policy for any noncompliance with legal requirements. Employees and business partners of the Company are committed to high business standards when engaging with stakeholders and building trustful intra-corporate relations.

The Company has developed and operates a number of fundamental anti-corruption instruments, including:

• Code of Ethics and Compliance ⁶⁴
• Anti-Corruption and Fraud Policy ⁶⁵
• Regulations on the settlement of corporate conflicts and conflicts of interest

⁶⁴ Kazatomprom’s Code of Ethics and Compliance is available on the official site of the Company at https://www.kazatomprom.kz/en/page/dokumenti

⁶⁵ Kazatomprom’s Anti-Corruption and Fraud Policy is available on the official site of the Company at https://www.kazatomprom.kz/en/page/dokumenti

Corporate Ethics

The Company is committed to the highest standards and principles of corporate ethics, as stipulated in the Code of Ethics and Compliance. Our employees build relations based on mutual respect and conduct themselves correctly and professionally towards colleagues, customers, and suppliers both inside and outside the Company.

All employees of the Company have been introduced to the Code of Ethics and Compliance as a part of the hiring process, as well as to any amendments thereto. The compliance team provides coaching to new employees, explains the principles of compliance during onboarding, welcome training sessions and master classes, and contributes to a compliance column in the corporate magazine. Staff members take regular tests to ensure that they understand and comply with the Code of Ethics and Compliance.

Kazatomprom has the Regulations on the settlement of corporate conflicts and conflicts of interest in place. Approved by the Board of Directors, the Regulations identify causes of corporate conflicts and conflicts of interests, describe the procedures to prevent them, and regulate actions of the corporate bodies as part of the conflict resolution.

As part of this process, the Company launched the conflict of interest declaration procedures for all employees in 2020. There are also plans to replicate the same in subsidiaries.

The Company monitors the management and use of insider information, notifies stock exchanges about transactions made by insiders, and helps prevent insider dealing.

In case of employment disputes or conflicts, certain disagreements are resolved in accordance with labour laws. Mediation is also used to resolve employment disputes.

The Company strives to foster competition and enshrines in its Code of Ethics that anti-trust methods of doing business harm partners, obstruct the operation of markets, and cause serious damage to partnerships, thus violating trust.

Office of the Ombudsman

The Office of the Ombudsman⁶⁶ has been operating since 2011.

In 2020, the Ombudsman investigated 16 complaints:

• decisions were delivered in favour of the claimants in case of three complaints
• arguments were not confirmed or partially confirmed in seven complaints
• recommendations were made to apply to the Company’s conciliation commission in case of three complaints
• following the consideration of two complaints, the Ombudsman provided explanations in accordance with the laws of the Republic of Kazakhstan and the procedures for participation in the competitive selection for a vacant position at Kazatomprom
• one complaint was dismissed because of a lack of new arguments

⁶⁶ The Office of the Ombudsman is a structural unit of the Company, functionally accountable to the Board of Directors, with the Ombudsman administratively accountable to the Chairman of the Management Board. The Office investigates complaints in accordance with the laws of the Republic of Kazakhstan (subject to confidentiality requirements) and consults employees of the Company, subsidiaries, associates and joint ventures and parties to employment disputes and conflicts, and assists with the development of mutually acceptable, constructive, and feasible solutions. The Ombudsman assists in resolving challenging social and employment issues facing employees of the Company, subsidiaries, associates and joint ventures, as well as issues relating to compliance by employees with the principles of business ethics.

Amid the COVID-19 pandemic in 2020, the meetings with the employees of subsidiaries, associates and joint ventures were restricted. In December 2020, the ombudsmen of subsidiaries, associates and joint ventures held an online meeting to discuss work-related issues, heard final reports of the ombudsmen, and presented statistics on the considered complaints. In addition, the meeting introduced the new ombudsmen of subsidiaries, associates and joint ventures who started working in Q2 2020 and established the Council of Ombudsmen of Kazatomprom.

The heads and representatives of the teams of the companies, jointly with the heads of the structural divisions of Kazatomprom, also held meetings on health and safety, social stability, and remuneration in the reporting period.

For more about the functions of the Ombudsman, see the 2019 Integrated Annual Report.

Compliance

Kazatomprom highly values its reputation as a reliable and stable business that strictly adheres to international law and the laws of the Republic of Kazakhstan. The Group considers it critical to identify early signs of corruption or corruption-related offences. Therefore, the priority area for the Company is to respond promptly to identified cases of possible corruption offences and other illegal actions committed by officials and employees. For this purpose, the Company has a special whistleblowing hotline for reporting any violations of the Code of Ethics and Compliance.

The hotline is administered by an external provider⁶⁷, which ensures the independence of reports and guarantees confidentiality and anonymity of the whistle-blowers. The Company’s actions to prevent and discourage violations of laws of the Republic of Kazakhstan or internal rules are prescribed by a number of internal regulations, of which the Confidential Reporting Policy is a principal paper.

⁶⁷ In 2020, the hotline was supported by Deloitte replaced by KPMG in late 2020. Both are from Big Four audit firms. All messages were forwarded by the hotline administrator to the Company’s Compliance Service, which initiated the appropriate investigations.

All the whistleblowing reports were considered by the deadlines established by the laws of the Republic of Kazakhstan and the Company’s internal documents.

Conflicts of Interest

The Company’s Code of Ethics and Compliance describes causes of conflicts of interest and conflict prevention procedures. Kazatomprom has the Regulations on the settlement of corporate conflicts and conflicts of interest in place. Approved by the Board of Directors, the Regulations identify causes of corporate conflicts and conflicts of interests, describe the procedures to prevent them, and regulate actions of the corporate bodies as part of the conflict resolution.

We have procedures in place for our employees to notify us about their conflicts of interest, including the ownership of shares in legal entities by the employees themselves or their close relatives and joint work of close relatives. Notification helps Kazatomprom identify existing or potential conflicts of interest at an early stage and take measures to resolve them.

Anti-Corruption Action

In late 2019, the Company approved an updated Anti- Corruption and Fraud Policy setting out the main areas of the Company’s anti-corruption actions and general rules of conduct to be followed by officials and employees when combating corruption and fraud.

The updated policy is designed to meet the requirements of applicable laws of the Republic of Kazakhstan, the UK Bribery Act, other applicable international laws, the Code of Ethics and Compliance, the Corporate Governance Code, and other internal regulations of the Company.

The policy regulates the actions of employees and officials if they identify cases of corporate fraud or corruption. Every employee or official of the Company signs a commitment paper to comply with anticorruption laws. Consequently, it is the personal duty of every official and employee of Kazatomprom to combat corruption and fraud.

Government Relations and Sponsorship

The Company’s approach to stakeholder communications excludes any form of bribery or corruption and applies to relations with both private entities and government authorities.

In accordance with the Code of Ethics and Compliance, Kazatomprom does not make any payments to political parties, organisations, or their representatives, nor does it participate in political activities.

The receipt and provision of material assets, products, services, or benefits to influence decision-making is prohibited at Kazatomprom. When employees of the Company interact with government officials, an offer or acceptance of the aforesaid benefits is also strictly forbidden. This is regulated by the Kazatomprom’s Regulations on giving and receiving gifts and branded souvenirs and the laws of the Republic of Kazakhstan On the Public Service of the Republic of Kazakhstan and On Combatting Corruption.

By the decision of the Board of Directors of Samruk-Kazyna JSC in January 2016, the Fund’s Charity Policy and Charity Program were approved. Currently, the implementation of charitable activities of Kazatomprom as a Corporate Center is carried out by the Social Projects Development Fund Samruk-Kazyna Trust, which implements socially significant projects through selection on a competitive basis. Samruk- Kazyna Trust is a single operator of the charitable activities of the group of companies of Samruk-Kazyna JSC, which implements projects and programs aimed at solving socially significant issues.

For more about the principles of anti-corruption and fraud system, see the 2019 Integrated Annual Report.