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CORPORATE GOVERNANCE SYSTEM

In accordance with the legislation of the Republic of Kazakhstan and the Charter of KMG, the corporate governance structure of KMG is as follows:

• supreme body – General Meeting of Shareholders;
• management body – the Board of Directors, accountable to the General Meeting of Shareholders;
• executive body – the Management Board, accountable to the Board of Directors;
• The Internal Audit Service is a centralised body directly subordinate and accountable to the Board of Directors, exercising control over the financial and economic activities of the Company and other organisations of the KMG Group of Companies, which are part of the Fund according to the Law of the Republic of Kazakhstan No 550-IV LRK “On Sovereign Wealth Fund” dated 1 February 2012 (hereinafter – KMG Group), assessment in the field of internal control and risk management, execution of corporate governance documents and consulting for improvement;
• The Corporate Secretary shall perform his/her functions on a permanent and independent basis, shall not be a member of the Board of Directors and/or executive body of the Company, shall be appointed by the Board of Directors of KMG and shall report to the Board of Directors of KMG, shall exercise, within his/her competence, realization and control and oversight functions in KMG’s corporate governance system;
• Compliance Service, which reports to the Board of Directors, whose activities are aimed at ensuring compliance with mandatory regulatory requirements and international best practices on anti-corruption and building the internal corporate culture of KMG Group, ensuring transparency, honesty among employees, and creating conditions for doing business in accordance with best international standards, internal policies and legislation of the Republic of Kazakhstan;
• The Ombudsman is a person appointed by the KMG Board of Directors whose role is to advise and assist KMG employees in resolving labour disputes, conflicts, social and labour issues, and to ensure that KMG employees observe the principles of business ethics.

KMG’s corporate governance system is based on respect for the rights and legitimate interests of shareholders and key stakeholders: the state, strategic partners and counterparties (suppliers and customers), investors, KMG employees, municipalities, local communities and residents of the regions where the Company operates.

The Company’s corporate governance system is constantly being improved to meet the requirements and standards of Kazakhstan and international corporate governance practices.

KMG establishes committees of the Board of Directors to consider the most important issues and prepare recommendations to the Board of Directors. As of December 31, 2022, the following committees operated under the Board of Directors:

1. The Nomination and Remuneration Committee was created for a range of tasks related to succession planning of the Board of Directors and the Management Board, evaluation of the activities of KMG bodies, ensuring effective personnel policy, remuneration and remuneration systems, as well as social support, professional development and training of KMG officials and employees.
2. The Strategy and Portfolio Management Committee was established on the issues of development strategy and investment policy, priority areas of KMG’s activities, increasing the investment attractiveness of KMG, planning financial and economic activities and monitoring the transformation of KMG.
3. The Audit Committee was established to establish effective control over financial and economic activities, including the completeness and reliability of financial statements, the effectiveness of internal control systems, risk management and corporate governance, as well as control over the independence of external and internal audits.
4. The Health, Safety, Environment, and Sustainability Committee was established to consider a range of issues related to safety, labor and environmental protection, implementation of the principles of sustainable development and socio–economic development, social obligations and programs, ensuring business continuity and environmental efficiency. This committee is responsible for initiating, in-depth consideration and decision-making on the economic, environmental and social aspects of the impact of the organization.

As of December 31, 2022, the composition of the Board of Directors of KMG is as follows8:

1. Walton Christopher John – Chairman of the Board of Directors, Independent Non-Executive Director;
2. Mirzagaliev Magzum Maratovich – Chairman of the Management Board of KMG;
3. Miller Timothy Glen – Independent Non-Executive Director;
4. Holland Philip Malcolm – Independent Non-Executive Director;
5. Karabalin Uzakbai Suleimenovich – Non-Executive Director, representative of the interests of Samruk-Kazyna JSC;
6. Zhanadil Yernar Beisenuly – representative of the interests of Samruk-Kazyna JSC;
7. Аuganov Gibrat Kairatovich – representative of the interests of Samruk-Kazyna JSC;
8. Assel Khairova – Independent Non-Executive Director.

At the time of reporting, the composition of the committees of the Board of Directors of KMG is presented as follows (decision of the Board of Directors of KMG dated February 2, 2022, Minutes No. 1/2022):

Audit Committee

1. Assel Khairova – Chairman of the Committee
2. Miller Timothy Glen
3. Holland Philip Malcolm

Strategy and Portfolio Management Committee

• Walton Christopher John – Chairman of the Committee
• Uzakbai Karabalin
• Holland Philip Malcolm
• Yernar Zhanadil
• Miller Timothy Glen

Nomination and Remuneration Committee

• Holland Philip Malcolm – Chairman of the Committee
• Gibrat Auganov
• Walton Christopher John
• Assel Khairova

Health, Safety, Environment, and Sustainability Committee

• Miller Timothy Glen – Chairman of the Committee
• Assel Khairova
• Uzakbai Karabalin
• Walton Christopher John
• Holland Philip Malcolm

The Company complies with the requirements of the Corporate Governance Code regarding the number of independent directors on the Board of Directors, according to which the number of independent directors is up to 50 % of the total number of members of the Board of Directors.

The Chairman of the Board of Directors is an independent director and all KMG Board Committees are chaired by independent directors.

The total number of members of the Board of Directors as of 31.12.2022 is 8, including:

1. independent directors – 4,
2. representatives of Samruk-Kazyna JSC – 3;
3. Executive Director (Chairman of the Management Board) – 1.

Of the eight members of the Board of Directors, five are Kazakh nationals, two are from the United Kingdom and one from the United States of America.

The term of office of the Board of Directors is three years. Members of the Board of Directors may be re-elected for more than six consecutive years with special consideration given to the need for qualitative renewal of the Board of Directors. In exceptional circumstances, election for a term of more than nine years is permitted (for independent directors, a detailed and convincing justification for such a need will be prepared and disclosed by the Company to all stakeholders).

At the same time, based on the results of an independent corporate governance diagnostic carried out at KMG, the Company has received a recommendation to consider discussing with the Shareholder an approach to retain shareholder representatives and independent directors on the Company’s Board of Directors for a longer period of time. It was also recommended that consideration should be given to aligning the term of representatives with the period of the chosen Company Strategy. This, according to the independent consultant, can give the following advantages: the term of office of individual directors lasting five to six years and their rotation in different years will ensure continuity of knowledge about the Company’s activities and its corporate governance processes. Longer tenure on the Board contributes to the quality of the work done and the responsibility for the successful realization of the Company’s strategy.

The Board of Directors and its Committees maintain a balance of skills, experience and knowledge that ensure the adoption of independent, objective and effective decisions in the interests of KMG and taking into account fair treatment of all shareholders and the principles of sustainable development. In accordance with paragraph 4 of Article 54 of the Law of the Republic of Kazakhstan dated May 13, 2003 No. 415-II LRK “On Joint Stock Companies” and paragraph 9 of Chapter 5 of the Corporate Governance Code of KMG, members of the Management Board, except for the Chairman of the Management Board, cannot be elected to the Board of Directors, while the Chairman of the Management Board cannot be elected Chairman of the Board directors.

More detailed information about the members of the Board of Directors is provided on the KMG website: https://www.kmg.kz/en/sustainable-development/corporate-governance/directors_board/

The Board of KMG as of December 31, 2022 consists of 8 people.

The Management Board consists of:

The Management Board carried out its activities in accordance with the Work Plan of the Management Board of JSC NC “KazMunayGas” for 2022, endorsed by the decision of the Board of KMG dated 06.12.2021
(Minutes No. 44).

According to the rules of work, in-person meetings of the Management Board were held weekly.

These quantitative data indicate the regularity of in-person meetings of the Management Board, which fully complies with the provisions of the KMG Corporate Governance Code.

During 2022, the Board of KMG made 654 decisions (100 %) at face-to-face meetings. 68 minutes of meetings of the Executive Body have been drawn up.

Out of the total number of full-time decisions of the Management Board adopted following the results of 12 months of 2022, 153 issues were submitted to the Board of Directors of KMG in accordance with the established procedure.

During January – December 2022, the following Board decisions were also endorsed:

• Quality policy of JSC NC “KazMunayGas”;
• Energy policy of JSC NC “KazMunayGas”;
• Sustainable development policy;
• Human rights and Public relations policy;
• Personnel health management program in the Group of Companies of JSC NC “KazMunayGas”;
• Internal carbon pricing program of JSC NC “KazMunayGas”;
• Staffing table of JSC NC “KazMunayGas”;
• The norm rate for 2023 of some organizations of the Group of Companies of JSC NC “KazMunayGas”;
• Regulations on crisis management of JSC NC “KazMunayGas”;
• Scheme of official salaries of managerial and administrative employees of JSC NC “KazMunayGas”;
• Adjusted Budget of JSC NC “KazMunayGas” for 2022;
• The budget of JSC NC “KazMunayGas” for 2023.

In addition, 41 decisions endorsed amendments and additions to certain internal documents of KMG.

Responsibility for economic, environmental and social issues

In accordance with the Corporate Governance Code, the Board of Directors and the Management Board ensure, within their respective competencies, that an appropriate sustainability system is in place and implemented, with officers and all employees at all levels contributing to sustainable development.

As of December 31, 2022, at the level of the management body, responsibility for addressing issues of sustainable development is distributed as follows:

1. The Compliance Service is responsible for compliance with mandatory regulatory requirements and best international practices on anti-corruption issues and the formation of the internal corporate culture of the KMG Group of Companies to ensure transparency, honesty among employees, as well as creating conditions for conducting business in accordance with the best international standards, internal policies and legislation of the Republic of Kazakhstan.
2. The Ombudsman Service is responsible for observing the fairness and interests of all employees of the Company through early warning and settlement of disputes and conflicts; submission of problematic issues of a systemic nature to the relevant authorities and officials and requiring solutions to proposals for the stabilization of conflict situations.

At the level of the executive body, responsibility for addressing sustainable development issues was distributed as follows:

1. Deputy Chairman of the Management Board for Strategy, Investment and Business Development: issues of establishing and implementing a sustainability management system to ensure compliance with sustainability principles, as well as integrating sustainability into key processes, Company strategy, decision-making processes, Company low-carbon development issues and ESG rating;
2. Deputy Chairman of the Management Board for Economics and Finance is responsible for solving a complex of issues of the economic component of sustainable development, including issues of promoting the economic development of the regions of presence;
3. Director of the HSE Department: issues of formation and ensuring the realization of KMG’s strategy and policies in the field of labor protection, industrial safety and environmental protection, as well as, in general, for issues of ensuring industrial safety, health, labor protection, environment and environmental safety;
4. Director of the Department of Human Resources Management: issues of realization of processes and management of labor, human resources and social aspects of sustainable development.

The above-mentioned persons are accountable to the Chairman of the Management Board of KMG. The accountability of those responsible for economic, environmental and social issues is regulated in detail by the Company’s internal regulations, internal control and business continuity procedures. Thus, on a regular basis, in accordance with development plans, issues are submitted for consideration by the Management Board, which, in turn, is accountable to the Board of Directors. At the same time, before considering the relevant issues at the meetings of the Board of Directors, the Committees of the Board of Directors develop recommendations for the Board of Directors according to the following distribution: comprehensive control over the performance of functions and measures to improve corporate governance is assigned to the Audit Committee of the Board of Directors of KMG, initiation, in-depth consideration and decision-making on the economic, environmental and social aspects of the impact of the organization, as well as control over the implementation of sustainable development in KMG are assigned to the Health, Safety, Environment and Sustainability Committee of the Board of Directors of KMG (hereinafter referred to as HSESC).

Advising stakeholders on economic, environmental and social issues

Consultation on economic, environmental and social issues between stakeholders and the Company’s highest corporate governance body takes place in various ways on an ongoing basis.

For example, HSESC provides general guidance over the activities of the above-mentioned officials.

In 2022, 5 meetings of the Committee were held, at which 40 issues were considered.

HSESC of the KMG Board of Directors reviews and organizes issues of sustainable development, prepares recommendations for the endorsement of the sustainable development policy, the annual Report on the sustainable development of KMG, action plans and other internal documents in the field of sustainable development, the endorsement of which falls within the competence of the Board of Directors, the introduction of social, economic and environmental components of sustainable development, the formation of a system management in the field of sustainable development, definition of goals and efficiency in the field of sustainable development, control over the implementation of sustainable development in KMG, integration of sustainable development into key processes of KMG.

The main focus of the HSESC in 2022 was the issues of occupational safety, industrial safety and environmental protection, strategic management of ESG (Environmental – Social – Governance) aspects, as well as the implementation of a sustainable development system.

The key issues on the Committee’s agenda in 2022 include the following:

• Reports on occupational safety, industrial safety and environmental protection;
• About crisis and emergency management in the KMG Group of companies – about fire safety in the KMG Group of companies;
• On waste management, the status of the implementation of the Memorandum on the Disposal of Historical Waste;
• About automation and digitalization projects in the field of HSE;
• On measures to improve fire safety in the KMG Group of companies;
• On KMG’s environmental projects;
• On the management system for Occupational Health and Hygiene;
• On the management of KMG contractors;
• Reports on the situation in KMG on COVID-19;
• On the ESG (environmental, social, governance) rating of KMG;
• On the implementation of the sustainable development system in KMG and its business units and the inclusion of the principles of sustainable development in key business processes;
• On KMG’s contribution to achieving the Sustainable Development Goals;
• On material topics to be disclosed in the Sustainability Report for 2022;
• On the realization of the Low-carbon Development Program for the period 2022–2031.

In addition, the Committee in 2022, among other things, reviewed and approved the following main documents:

• On endorsement of the Report on the Sustainable Development of JSC NC “KazMunayGas” for 2021;
• On the endorsement of the Policy in the field of Sustainable Development;
• On endorsement of the Policy in the field of Human rights and public relations;
• On the endorsement of the Corporate Standard in the field of occupational safety and health “Life-Saving rules” for employees of the KMG Group of Companies.

To participate in the work of the Committee, KMG officials and employees were regularly invited to the meetings of the Committee without the right to vote. The Board of Directors of KMG adopted each of the recommendations developed by the Committee.

An extensive list of stakeholders is advised on economic, environmental and social issues through the Company’s website, the Public Relations Service (Press Service), and through the production of the annual Sustainability Report, which is KMG’s central channel of communication with external and internal stakeholders on sustainability disclosure issues. At the same time, KMG has various communication methods that allow for proper dialogue with stakeholders and the Company. For example, information for the investment community is posted on a special portal https://www.kmg.kz/en/investors/, employment issues are posted on the portal http://work.kmg.kz, for violations of legislation and internal regulatory documents of KMG, you can contact the line of the doverie@kmg.kz trust system, the confidential information system is available through the internet portal http://www.sk-hotline.kz/, as well as functional interaction is carried out on the activities of the Ombudsman ombudsman@kmg.kz, labor protection and the environment hse@kmg.kz and sustainable development
sustainability@kmg.kz.

Informing about critical issues

Informing the Board of Directors of KMG about critical issues is carried out through regular reports on the Company’s activities, including, but not limited to the following: the report of the Chairman of the Board of KMG on key changes in activities, information on labor and environmental protection, a report on preliminary results of financial and economic activities, information on the impact of sanctions against the Russian Federation on the activities of KMG, a report on interested party transactions, resolutions on which were made by the Management Board, a review of the status of strategy realization, key performance indicators and investment projects, a report on the realization of the consolidated Development Plan of KMG, a risk report, a report on the realization of resolutions of the Board of Directors, as well as reports of the chairmen of the committees of the Board of Directors.

In addition to the aforementioned reports, the Board of Directors from time to time identifies matters that require immediate reporting, such as information on the current situation in the KMG Group, operational performance, etc., on financial performance, on significant health and environmental incidents in KMG Group companies, including reports on fires (even if such events occurred after the reporting period). The Committee of the Board of Directors of KMG on Safety, Labor Protection, Environment and Sustainable Development regularly reviews and discusses reports on the implementation of the sustainable development system in KMG and its business units and the inclusion of the principles of sustainable development in key business processes, as well as information on the status of work to improve the ESG rating (Environmental – Social – Governance).

For reference: The Company monitors existing sanctions to minimise adverse effects and consequences, taking into account the potential expansion of sanctions, which could have a point-to-point impact on the Company’s promising projects. In order to mitigate risks, the Company foresees mechanisms for exiting projects or implementing them independently in the event of a tightening of the sanctions regime. A working group has been formed to analyse the impact of sanctions on KMG’s activities and to develop necessary measures. Consolidated information on the impact of sanctions on the activities of KMG is provided on a periodic basis to the KMG Board of Directors, the Fund, the Ministry of Economic Affairs of the Republic of Kazakhstan and interested KMG units.

The nature and number of critical issues

According to the Corporate Governance Code of KMG HSESC approves its work plan, which is coordinated with the work plan of the Board of Directors, indicating the list of issues under consideration and the dates of meetings. As part of the review of KMG’s occupational and environmental protection information, which is considered at each in-person meeting of the Board of Directors, an instruction was given to promptly inform the members of the Board of Directors of any incidents in the field of occupational and environmental protection in KMG Group companies, regardless of the reporting period.

The Committee has introduced the practice of detailed consideration of key issues on HSE (deep dive questions) at the meetings. In 2022, as such, the Committee considered 5 issues: on crisis and emergency management in the KMG Group of companies, on waste management and the implementation of the Memorandum on the Disposal of Historical Waste, on automation and digitalization projects in the field of HSE,, on measures to improve fire safety in the KMG Group of Companies on environmental projects of KMG.

The Committee also regularly heard reports on the situation in KMG on COVID-19 and measures taken in the KMG Group of Companies to prevent the spread of COVID-19 coronavirus infection. In addition, the Committee hears a status report on the implementation of the sustainability framework in KMG and its business units and the incorporation of sustainability principles into key business processes.

The KMG Group occupational health and safety policy is based on the commitment of senior management to health and safety and aims to involve every employee in the development of a safety culture.

Nomination and selection of the management body

Procedure for nomination and selection of candidates to the Board of Directors

The procedure for nominating and selecting candidates to the Board of Directors is determined by KMG’s Charter and other regulatory documents, is carried out by the General Meeting of Shareholders together with the Chairman of the Board of Directors and the Chairman of the Nomination and Remuneration Committee and is guided by the principles of transparency, fairness and professionalism in the search for and recruitment of candidates.

Members of the Board of Directors are elected from among those proposed for election as representatives of shareholders and other persons. Candidates for members of the Board of Directors must have the knowledge, skills and experience necessary to perform their official functions and ensure the growth of long-term value and sustainable development of the Company, as well as have an impeccable business reputation.

The Chairman of the Board of Directors is elected by the General Meeting of Shareholders.

Independent directors are selected in accordance with the Rules on the Formation of the Board of Directors of Samruk-Kazyna JSC, endorsed by the resolution of the Board of Samruk-Kazyna JSC dated September 26, 2016, Minutes
No. 35/16.

Conflict of interest

The main processes for managing conflicts of interest in the company are reflected in the Policy on Conflict of Interest for Employees and Officers of KMG and its subsidiaries and affiliates endorsed by the Board of Directors of KMG, as well as in the Code of Business Ethics.

It is the responsibility of every Employee, regardless of position, and every Officer of the company to ensure compliance with the requirements of this Policy.

Currently, the company has implemented a procedure for Initial disclosure of information about a possible conflict of interests among employees and/or officials when hiring/appointing/appointing and assuming a new position. This Disclosure includes the following information: 1) information about beneficial ownership/equity participation and management in the Counterparty companies / Competitors of KMG and its subsidiaries; 2) information about participation in the sole and collegial bodies of Counterparties or Competitors of KMG and its Subsidiaries;
3) information about interaction with Counterparties of KMG and its subsidiaries; 4) information about the intention to acquire assets and/or securities owned by KMG and/or its subsidiaries, etc. It is planned to conduct a check for the presence of a conflict of interest and compliance with the requirements and procedures of KMG’s policies and/or other documents in the field of compliance, including the presence of signs of affiliation among officials of the Samruk-Kazyna Group of Companies with persons considered as candidates for employment, appointment to senior positions, as well as when conclusion of transactions in which there is an interest. Additionally, Consent is being collected for the adoption of anti-corruption restrictions in accordance with the Law of the Republic of Kazakhstan dated November 18, 2015 No. 410-V of the LRK “On Anti-corruption” from the above-mentioned persons.

The role of the management body in defining goals, values, mission and strategy

The Board of Directors of KMG actively participates in the strategic planning and realization of the KMG Development Strategy.

In order to monitor KMG’s strategic initiatives and take timely corrective measures, the Board of Directors regularly hears the report of the Chairman of the Management Board of KMG on key changes in activities, information on labor and environmental protection, a report on preliminary results of financial and economic activities, a report on interested-party transactions, decisions on which were made by the Management Board, review of the status of realization of the Development Strategy, efficiency and investment projects, report on the realization of the consolidated Development Plan of KMG, reports of the chairmen of the committees of the Board of Directors, report on the realization of decisions of the Board of Directors, as well as reports on the activities of services accountable to the Board of Directors.

The Board of Directors is responsible for determining the priority areas of KMG’s activities and endorsing the KMG Development Strategy, as well as monitoring its realization.

A scheduled meeting was held on 15 June 2022 to review the Development Strategy and external factors and their impact on KMG’s Development Strategy 2022–2031, approved by the Board of Directors on 3 November 2021 (Minutes 17/2021). The issue of the relevance of the current KMG Development Strategy, including its compliance with the ongoing reform of Samruk-Kazyna JSC and external factors, was considered.

The Board of Directors considered a number of strategic issues in 2022:

• Alternative routes of oil delivery to foreign markets;
• Endorsement of the Consolidated KMG Development Plan for 2023–2027;
• On the consolidated Business Plan of JSC NC “KazMunayGas” for 2023–2027;
• Endorsement of KMG’s corporate key performance indicators and their target values;
• Endorsement of the structure of the central office of KMG;
• On the KMG Development Strategy;
• On the Report on the realization of the KMG Development Strategy until 2028 for 2021;
• Issues of realization of investment projects;
• Endorsement of maps of motivational key performance indicators of managers and their target values;
• Conclusion of contracts by KMG for the procurement of oil, procurement and sale of petroleum products;
• On the issue of KMG bonds and on determining the terms of the issue;
• About the implementation of the Coöperatieve KazMunaiGaz U.A. repurchase of 50 % of the shares of KMG Kashagan BV from Samruk-Kazyna JSC;
• Cyber security issues.

On September 7, 2022, the annual meeting of the Board of Directors of KMG on sustainable development was held, during which discussions were held on the following topical issues:

• Global trends in the field of sustainable development, approaches to the construction of the strategy of JSC NC “KazMunayGas” in the field of sustainable development;
• Critical assessment and in-depth discussion of ESG development options of JSC NC “KazMunayGas”;
• Status of realization of the low-carbon development program of JSC NC “KazMunayGas”.

The Board of Directors is aware of the high priority of environmental issues and environmental protection, the life and health of the Company’s employees and its contractors at all its production facilities, the development of human resources and commitment to universally recognized global goals in the field of sustainable development, therefore defines sustainable development and progressive reduction of carbon intensity of production as one of the main strategic goals of KMG, which is consistent with the vision of Samruk-Kazyna JSC, the Development Strategy of the Republic of Kazakhstan and the agenda of the global investment community.

The role of the supreme corporate governance body in the preparation of a sustainable development report

In accordance with the Company’s Charter, the endorsement of the Sustainable Development Report falls within the competence of the Board of Directors of KMG.

Health, Safety, Environment and Sustainability Committee of KMG’s Board of Directors is the body that reviews and makes a recommendation to the KMG Board of Directors on the approval of the Sustainability Report.

In accordance with the new GRI standards, the disclosure of material topics in the Sustainable Development Report (GRI 3: Material Topics 2021) is determined in each reporting period and with the direct participation of the members of the Board of Directors.

In October 2022 KMG Board of Directors at the HSESC meeting was provided with information on material topics to be disclosed in the KMG Sustainable Development Report for 2022. Material topics are defined according to GRI Standards 2021 and the industry standard (GRI 11: Oil and Gas Sector 2021).

In order to confirm the data presented in the Sustainable Development Report, an independent party verifies it, which in turn contributes to increasing the reliability of the information disclosed in the Report and the confidence of investors and, as a result, improving the investment attractiveness of KMG.

Competence and evaluation of the management body’s activities

Collective knowledge of the members of the management body

Members of the Board of Directors strive to regularly improve their skills and professionalism, including in terms of managing economic, environmental and social aspects. The Nominating and Remuneration Committee regularly reviews the current balance of skills and knowledge of the members of the Board of Directors. Information about the training of members of the Board of Directors is regularly updated on the Company’s website and is available at the following link: https://www.kmg.kz/en/sustainable-development/corporate-governance/directors_board/.

At the meetings of the Board of Directors, including a separate annual meeting of the Board of Directors on sustainable development, as well as the Committee of the Board of Directors on Safety, Occupational health and Environment and Sustainable Development, the most relevant topics within the scope of ESG (environmental, social, governance) aspects are regularly discussed as part of the consideration of issues, in particular including information about international trends and domestic initiatives.

Assessment of the activities of the management body

In accordance with the Code, the Board of Directors, Committees and members of the Board of Directors must be evaluated on an annual basis as part of a structured process endorsed by the Board of Directors. This process should comply with the methodology of Samruk-Kazyna JSC. At the same time, at least once every three years, the assessment is carried out with the involvement of an independent professional organization.

In 2021, in 11 portfolio companies of Samruk-Kazyna JSC, including KMG, the team of PricewaterhouseCoopers LLP conducted an independent diagnosis of corporate governance for the period from January 1, 2020 to May 31, 2021. Within the framework of this diagnosis, activities were evaluated in the following five areas: the effectiveness of the Board of Directors and the executive body; risk management, internal control and audit; sustainable development; shareholders’ rights; transparency.

Based on the results of an independent diagnosis, KMG has approved the Action Plan for improving the corporate governance of JSC NC “KazMunayGas” for 2022–2023.

In this regard, a separate independent assessment of the activities of the Board of Directors in 2022 was not carried out.

At the same time, in 2022, in accordance with the requirements of the Code, a self-assessment of the members of the Board of Directors was conducted by means of a questionnaire based on the results of 2021. The self-assessment questionnaire was developed jointly by the Chairmen of the Nomination and Remuneration Committee and the Board of Directors. The questionnaire consisted of two sections – “Composition and processes”, “Behavior and actions” – and 30 questions. The results of the self-assessment were previously reviewed by the Nomination and Remuneration Committee, during which a recommendation was made to the Chairman of the Board of Directors, together with the Chairman of the Nomination and Remuneration Committee, to discuss the following aspects during the meeting of the Board of Directors when discussing the results of the self-assessment of the activities of the Board of Directors for the results of 2021:

1) appointment of the Chairman of the Audit Committee of the Board of Directors of KMG;

2) diversity in all aspects;

3) succession plan and the process of electing members of the Board of Directors;

4) KMG strategy;

5) professional development and training.

At the meeting of the Board of Directors in December 2022, the issue of evaluating the activities of the KMG Board of Directors based on the results of 2022 was considered. The purpose of conducting self-assessment on an annual basis is to identify dynamics based on the results of filling out questionnaires by members of the Board of Directors. The Board of Directors of KMG decided to evaluate the activities of the Board of Directors of KMG by the results of 2022 through self-assessment, in order to identify provisions that require attention, as well as to compare the results with those obtained earlier.

In the Q1 of 2023, it is planned to complete the process of evaluating the Board of Directors, Committees of the Board of Directors, members of the Board of Directors and the Corporate Secretary based on the results of 2022 by self-assessment. With this in mind, the Board of Directors will continue to discuss improvements in its activities.

Remuneration policies and process of determining remuneration

The remuneration level of the members of the Board of Directors of KMG is established by the Decision of the General Meeting of Shareholders, in accordance with the agreements with the members of the Board of Directors of KMG.

Remuneration of members of the Board of Directors of KMG is fixed. In addition to the fixed remuneration for the Chairman of the Board of Directors, there is an additional remuneration for chairing the Board of Directors.

According to the Corporate Governance Code, “the level of compensation for members of the Board of Directors must be sufficient to attract, retain and motivate each member of the Board of Directors to the level required to successfully manage the organization. At the same time, remuneration to a member of the Board of Directors of the organisation is determined in accordance with the methodology developed by Samruk-Kazyna JSC and the expected positive effect for the organisation from the participation of this person in the Board of Directors should be taken into account”. Also, according to the Corporate Governance Code, no person should participate in decisions related to his or her own remuneration.

The procedure for determining the amount of remuneration is determined by the General Meeting of Shareholders. The resolution of the Board of Samruk-Kazyna JSC dated September 26, 2016 (Minutes No. 35/16) endorsed the Rules for the formation of the Board of Directors of the companies of Samruk-Kazyna JSC, providing, among other things, the procedure for determining remuneration to members of the Board of Directors. In accordance with Section 3 of the Rules, ‘Remuneration and reimbursement of expenses’, the remuneration takes into account the responsibilities of the Directors, the scope of the company’s activities and the long-term goals and objectives set out in the development strategy and business plan. Remuneration is paid to independent directors. Remuneration to representatives of Samruk-Kazyna JSC as part of the Board of Directors of companies belonging to the group of Samruk-Kazyna JSC is determined on the basis of the resolution of the Board of Samruk-Kazyna JSC. In order to form a competitive remuneration in order to attract and retain professional directors, the decision of the Management Board of the Fund establishes the maximum annual remuneration for individual sectors of the Fund’s assets. The establishment of maximum annual remuneration (limits) is carried out in comparison with the remuneration amounts adopted in similar companies.

In 2022, KMG did not involve consultants to determine the amount of remuneration to members of the Board of Directors.

Participation of stakeholders in relation to remuneration

The procedure for determining the amount of remuneration is determined by the General Meeting of Shareholders of KMG – Samruk-Kazyna JSC. In accordance with Samruk-Kazyna’s Rules for Composition of the Board of Directors, which stipulate, among other things, the procedure for setting remuneration for members of the Board of Directors, when setting the amount of remuneration, the responsibilities of a member of the Board of Directors, the scale of the company’s operations, and long-term goals and objectives are taken into account. Remuneration is paid to independent directors. Remuneration to representatives of Samruk-Kazyna JSC in the composition of the Board of Directors of Organizations is determined on the basis of the resolution of the Board of Samruk-Kazyna JSC. In accordance with the Corporate Governance Code, the Nomination and Remuneration Committee of the Board of Directors makes proposals on the amount of remuneration of candidates for independent directors.

At the meetings of the Nomination and Remuneration Committee of KMG’s Board of Directors, issues related to the remuneration of members of KMG’s Board of Directors shall be discussed as necessary.

In the reporting period, the Committee of the Board of Directors on Appointments and Remuneration reviewed the results of the self-assessment of the activities of the Board of Directors of KMG based on the results of work for 2021, which assessed the level of remuneration of members of the Board of Directors of KMG.

More detailed information on GRI indicators 2-12, 2-20, 2-21 (risk management, remuneration of the Board of Directors) is reflected in KMG’s Annual Report for 2022 on the KMG https://www.kmg.kz/en/investors/reporting/.