2009 Annual Report JSC NC Kazakhstan Temir Zholy
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1 2009 Annual Report JSC NC Kazakhstan Temir Zholy 2 CONTENTS PRESIDENT’S STATEMENT 3 GENERAL INFORMATION 4 General Information 4 Board of Directors 5 Management Board 6 Structure of Governance of the Company 10 Annual Summary 11 MANAGING REPORT OF GROUP OF COMPANIES 16 Business and general condition 14 Changes within Company 14 General performance of Company’s activities 20 Freight traffic 21 Passenger traffic 22 Infrastructure 23 Financial and economic activities 26 Analysis of state control of market 28 International cooperation 29 FINANCIAL STATUS 32 Raitings 32 Financial management 32 Capital expenses within the group of companies 44 2020 Kazakhstan Railways Development Strategy 38 SUSTAINABILITY 40 Corporate risk management 40 Human Resources and Social Policy 41 Protection of environment 47 Labour Safety 47 Traffic Safety 48 PERSPECTIVES OF COMPANY’S DEVELOPMENT NEXT YEAR 50 CONSOLIDATED FINANCIAL STATEMENTS 52 MAIN FINANCIAL AND PRODUCTION INDICATORS 60 3 General Information On 31 January 1997 the Government of the Republic of Kazakhstan passed resolution No. 129 to reorganise rail enterprises of the Kazakhstan Republic by way of a merger of state enterprises, namely Almaty, Tselinnaya and West Kazakhstan Directorates of railways to create the Republican State Enterprise Kazakhstan Temir Zholy. The merger was aimed at improving the governance of transportation process and closing down excessive units, and improving financial and economic performance of the rail industry. March 15, 2002 saw resolution of the Kazakhstan Government No. 310 adopted to create the Closed Joint-Stock National Company Kazakhstan Temir Zholy through a merger of the Republican State Enterprise Kazakhstan Temir Zholy and its affiliated state entities. In compliance with the Kazakhstan Law On Joint-Stock Companies dated 13 May 2003, Kazakhstan Temir Zholy was re-registered and transformed from closed into joint-stock company on 2 April 2004. KTZ is currently a holding company, of which structure enables functional integrity and better governance of transportation process. Sole proprietor of KTZ is the National Welfare Fund Samruk-Kazyna, which strives for improved system of corporate governance, increased budget transparency, and regulates KTZ activities through the Directors Board, without interfering with daily operations. In addition, KTZ’s activities are controlled by the Kazakhstan’s Ministry of Transport and Communications, authorized to carry out government policy in the field of rail transport and to coordinate, regulate and control transportation complex of the Republic of Kazakhstan in line with the Law On Rail Transport of 8 December 2001 No. 266-II. KTZ performs functions of a mainline operator, provides passenger and freight rail transportation services. These activities are regulated by Kazakhstan’s Laws On Railway Transportation and On Natural Monopolies and Regulated Markets accordingly. Rail transport is presently an important part of production infrastructure of Kazakhstan. Due to specific geographic location of Kazakhstan, with no access to sea and lack of navigable rivers, huge territory, predominance of extracting industries, underdeveloped motor infrastructure, railway transportation have become particularly significant for the country’s economy. Being yet a developing field of the Kazakhstan’s economy, rail transport, however, 4 succeeded recently in steady increase of production and technical potential, with the number of employed equal to 140.000. Board of Directors The Board of Directors sets strategic objectives and main courses of development, issues long-term guidelines for the Company to follow and provides with needed financial and human resources to achieve goals pursued. The Board controls activities of the executive body of KTZ. 2009 Report of the KTZ’s Directors Board. Generally, in 2009 the KTZ’s Board of Directors had 9 meetings, including 3 in person and 6 in absentia. There had been considered 66 issues, including: - 16 issues relating to KTZ’s share in activities of affiliated entities; - 3 issues concerning mandatory procedures according to the Law On Joint-Stock Company; - 2 issues on purchase of goods, works and services for KTZ’s needs; - 4 issues on approval and adjustment of KTZ’s budget; - 15 issues on approval of local acts regulating internal activities of KTZ; - 10 issues on KTZ’s production performance; - 2 issues on human resources; - 14 issues concerning internal activities of the Board. On the basis of the above 148 orders had been made. The sole proprietor have made a decision to elect members of the Board of Directors as follows: Kulibaev T.A. - Deputy CEO, Samruk-Kazyna, Chairman of the Directors Board; Mamin A.U. - President of KTZ; Baidauletov N.T. - Managing director, Samruk-Kazyna; Issingarin N.K. - Independent director; Bekturov A.G. - Vice-Minister of Transport and Communications of Kazakhstan Republic; Walton K. - Independent director; Shomody K. - Independent director; 5 Members of the Auditing Committee under the KTZ’s Board of Directors: Shomody K. - Independent director, Chairman of Committee; Baidauletov N.T. - Managing director, NWF Samruk-Kazyna, member of Directors Board, Committee member; Walton K. - Independent director, Committee member; Mynsharipova S.N. - Director, Auditing and Control Department, NWF Samruk- Kazyna, Committee expert. Committee members appointed by the Board of Directors: Baidauletov N.T. - Managing director, Samruk-Kazyna, member of Directors Board, Committee’s Chairman; Issingarin N.K. - Independent director, Committee member; Shomody К. - Independent director, Committee member; Ordabaeva А.Т. - Senior manager, Human Resources Management Department, Samruk-Kazyna, Committee expert. Members of Remuneration Committee under the Board of Directors: Issingarin N.K. - Independent director, Committee’s Chairman; Shomody K. - Independent director, Committee member; Bekturov A.G. - Vice-minister of Transport тand Communications of Kazakhstan, member of Directors Board, Committee’s member; Akhmetzhanova - Senior manager, Budgeting and Analysis Department, G.T. Samruk-Kazyna, Committee expert; Ordabaeva A.T. - Senior manager, Human Resources Management Department, Samruk-Kazyna, Committee expert; Lepesbaev A.M. - Managing director of economy, KTZ, Committee expert. Management Board Management Board is a collective executive body of the Company, in charge of making decisions on all matters relating to operations of the Company, which are outside of competence of other bodies and executives of the Company according to the Law, other legislative acts of Kazakhstan and the Statute. The Board of Directors defined the quantity of members of the Company’s Management Board, equal to 10, and elected its members. Members of the Management Board govern activities of the Company by way of taking part in meetings of the Board. Functions of the Management Board are as follows: 1) to execute decisions of Sole proprietor and the Company’s Board of 6 Directors; 2) to develop and submit to Directors Board 5-year term Strategic courses of development, Company’s Development Plans (medium-term business-plans), Company’s budget (annual business-plan); 3) to prepare and carry out Development Plans (medium-term business-plans), Company’s budget (annual business-plan), and also is in charge of their execution; 4) to develop and apply internal control and risk management procedures within the Company; 5) to timely notify the Board of Directors of material shortcomings in risk management system of the Company; 6) to approve structure and staff list of the Company, with consideration of Board of Directors’ affirmed list (total number) of employees of the central administrative department and representative offices of the Company; 7) to approve acts, not in competence of the Board of Directors, relating to organizational matters of the Company; 8) to perform functions of the Sole proprietor in relation to affiliated entities; 9) to set work regime of the Company; 10) to approve governance structure of the Company’s headquarters; 11) to submit to Sole proprietor anticipated rates of dividends on the Company’s shares before March 20 of the year preceding anticipated one; 12) to control execution of resolutions of the Board of Directors, the Sole proprietor of the Company, recommendations of auditor of annual financial statements, and also recommendations of the Internal Auditing Service; 13) to identify causes of illegal acts committed in relation to the Company’s property; 14) to adopt decision relating to other matters of the Company’s operation, which are not in exclusive competence of the Sole proprietor and the Board of Directors. In 2009 there were 46 meetings of the Management Board, including 16 in person and 30 – in absentia on matters in competence of the Board. The most significant documents of the Management Board in 2009 were 2020 Kazakhstan Railways Development Programme and 2020 Development Strategy of Kazakhstan Railways. 7 Members of Management Board in 2009: Mamin Askar Uzakpaevich – Management Board Chairman, President of Kazakhstan Railways. Born 23 October 1965, Tselinograd. Background: Tselinograd Civil Engineering Institution, Plekhanov Russian Academy of Economics. Experience: 1987 house builder with Zhilstroytrust. 1988 to 1991 military service in law enforcement bodies. 1991 to 1996 Deputy Director-General with the Kazakhstan Innovative Enterprises Union, Director-General JV Inter-Ishim Company Ltd. Later worked in municipal administration of Astana, in the Ministry