The Company is committed to internationally recognized human rights as enshrined in the International Human Rights Bill, ILO Standards at Work and strives to implement the UN Guiding Principles on Business and Human Rights.

KMG strictly complies with the requirements of the labour laws of the Republic of Kazakhstan and does not violate their rules in accordance with which no one can be subjected to any discrimination in the exercise of labour rights based on origin, social, official and property status, gender, race, nationality, language, attitude to religion, beliefs, residence, age or physical disability, as well as membership of public associations.

We do not use child labour, do not practice forced labour, and we recognize the equal rights of all employees, regardless of their race, religion and gender.

No facts of discrimination were recorded in the reporting period.

In 2022, the Board of Directors of KMG approved the Human Rights and Public Relations Policy. More information about the Policy is provided on the website of KMG: https://www.kmg.kz/en/sustainable-development/corporate-governance/corporate-documents/.

In the field of human rights, we make the following commitments:

• respect human rights in accordance with international standards;
• adopt programs to address the impacts on human rights in the industry, with the approval of the top management of KMG and SDEs;
• monitor the impacts on human rights and report thereof;
• comply with the mechanisms adopted by KMG for handling complaints and claims;
• provide indemnities and remedies to eliminate or mitigate negative impacts;
• exercise due diligence in relation to human rights by monitoring the impacts on human rights and reporting thereof;
• provide its employees with remedies to eliminate negative impacts; and
• disclose KMG’s expectations of personnel and third parties with respect to human rights.

Ethics and integrity

VALUES, PRINCIPLES, standardS and rules of conduct

Ensuring a high level of corporate responsibility is the most important principle of the Company’s work. Corporate responsibility involves transparent and ethical behaviour that contributes to sustainable development and is consistent with the law and international standards of conduct. The Company’s activities in this area are system-based, in which regard in 2022, the amendments have been made to the Anti-Corruption Policy and the Privacy Policy.

KMG’s activities are based on the following corporate values:

• Fairness
• Loyalty
• Development
• Safety
• Responsibility

Since the business relationships between KMG and shareholders, employees, subsidiaries and dependent entities, government agencies, partners, and other stakeholders, both in making business decisions and in everyday situations, are based on a harmonious combination of interests, mutual respect, trust, responsibility and respect for rights and observance of obligations of each of the parties, the Company strictly follows the provisions of the Code of Corporate Social Responsibility (hereinafter – the Code).

The Code is a public document and freely distributed among business partners of KMG and any other stakeholders. It is also posted on the Company’s web-site and in the Corporate Documents section: https://www.kmg.kz/en/sustainable-development/corporate-governance/corporate-documents/.

Mechanisms to apply for consultations on improper conduct

To control the respect for the rights of employees, confidential and accessible means have been organized to provide online the information about all the facts of wrongful acts by both employees and third parties.

In case of doubts about the legality of the actions of other employees, counterparties or other persons who communicate with KMG and its SDEs, any employee of the Group of Companies or any other person may report this to the management, their direct manager and the Compliance Service.

These reports may be transmitted through the following channels and means of communication that ensure confidentiality:

Any violations of the Code of Conduct, including facts of corruption, discrimination, improper conduct and other violations shall be reported to the Compliance Service through a single centralized Hot Line service administered by an independent operator – KPMG Company:

• free telephone call: 8 (800) 080-47-47
• WhatsApp: 8 (771) 191-88-16
• E-mail::mail@sk-hotline.kz
• Internet portal:www.sk-hotline.kz

The hotline contacts are posted on the corporate website of KMG in the state, Russian and English languages. Similar information is available on the websites of SDEs.

All employees of the Company, officials and other persons concerned have the right to apply to the Ombudsman. One of the main functions of the Ombudsman is to improve the rating and image of KMG through early warning, settlement of disputes and conflicts, submission of the issues of concern that are of a systemic nature and require appropriate decisions for consideration by the relevant bodies and officials, as well as making proposals concerning solution thereof. When preparing an annual report on the activities of the Ombudsman for the Board of Directors, the Ombudsman Service of KMG makes proposals for resolving systemic issues in the form of proposals/recommendations. The Ombudsman organized work, the objectives of which are:

• collection and analysis of information about social situation on the site, development of systemic preventive and operational measures to prevent the possible emergence of hotbeds of social tension; and
• evaluation of the development of operational situation in the regions of KMG’s presence and development of specific solutions and recommendations on problematic issues on the basis thereof.

In 2022, in order to get acquainted with the requirements of the Code of Business Ethics, the responsibilities and tasks of the Ombudsman, the Ombudsman Service of KMG held meetings with the management, managers of structural subdivisions and representatives of trade unions of KMG’s SDEs – Ozenmunaigas JSC, Karazhanbasmunay JSC, and Kazakhoil Aktobe LLP.

In accordance with the Regulations on the Ombudsman Service approved by the resolution of the Board of Directors of KMG dated 19 September 2019, the Ombudsman Service organized the work to consider and record the requests, including through the hotline.

In 2022, the Ombudsman considered 5 requests.

As for oral requests (made by telephone, personal consultations), the Ombudsman / Ombudsman Service provided consultations and gave recommendations. All received requests were considered by the Service with taking measures as much as possible to resolve arisen problematic issues at an early stage with taking advisory measures, including those aimed at restoring violated rights and legitimate interests. In addition, unrest in the teams and social tension in Karazhanbasmunay JSC, KMG-Kumkol LLP were prevented.

In 2022, KMG received 332 requests via the initiative informing Hotline of Nysana call centre regarding safety, violation of the rights and legitimate interests of employees, and social and labour conflicts. The Ombudsman Service of KMG and the Corporate Security Department control timely consideration thereof by the relevant structural subdivisions.

All communications, including anonymous ones, are received and processed by the operators and then they are transmitted to the Compliance Service of KMG, which ensures their professional and confidential consideration. The Compliance Service provides, on a quarterly basis, the information on the results of consideration of received requests to the Audit Committee and the Board of Directors of KMG.

In 2022, the hotline received 109 requests. A 43.4 % increase in complaints is observed in the Company as compared to 2021. The dynamics of incoming messages to the hotline demonstrates the growing confidence in this tool on the part of the persons concerned.

Thanks to the requests received through the hotline, it was possible to resolve issues not directly related to combating corruption and fraud. So, for instance, the hotline received requests related to violation of business conduct, abuse of office. All received requests were considered in accordance with the established procedure and within set time limits, with taking appropriate measures to reduce the likelihood of a recurrence of similar situations in the future and notifying the requesters of the results of consideration.

In 2022, 39 applications and requests were received through the ICS of KMG Group of Companies (2021 – 65, 2020 – 210); during the period from 1 July to 31 December 2022, 8 requests were sent to e-Otinish (4 applications, 2 complaints, 1 inquiry, 1 suggestion). The received requests are related to the issues concerning labour rights of employees, the salary level, labour safety conditions, the conditions for granting leaves (considering also harmful working conditions), violations during tenders and other procurement procedures, abuse of office and improper conduct of the enterprises’ managers.

Applications and requests, including anonymous ones, are considered in accordance with the established procedure and within set time limits, with taking measures and subsequently notifying the requesters.

Currently, the requests are received through e-Otinish (since July 2022, it was decided to stop the functioning of the ICS), which made it possible to minimize anonymous requests containing unconfirmed information that are often aimed at discrediting a particular person due to personal unfriendliness or conflict.

In 2022, as in previous years, there were no complaints regarding the facts of discrimination based on nationality, gender, religious convictions and political views. There are no registered cases of the use of forced and compulsory labour, as well as litigation and criminal prosecutions related to such violations.

Within KMG Group of Companies, the corporate security subdivisions perform comprehensive work to ensure the respect for the rights of employees and other persons. At the same time, they are strictly guided by the legislation of the Republic of Kazakhstan and international regulations, as well as general corporate and internal documents of the Fund, KMG and SDEs.

In general, the managements of KMG and SDEs pay serious attention to the issues of respect for the human rights and is constantly working to improve this area of activity.

Anti-Corruption

KMG builds its business on the principles of legality, fair practices and ethics. The Company strictly respects the human rights, takes all possible actions to prevent corruption, takes care of an impeccable reputation and strives to implement high international standards in the field of ethics.

The Compliance Service is functioning in KMG (hereinafter – the Service). The area of responsibility of the Service includes the elimination of existing risks associated with the possibility of corruption offenses committed by employees while performing their work. Remaining an independent direction of the Company, the Service is integrated with all business subdivisions of the Company.

To comply with the standards of ethical conduct and bona fide business conduct, KMG has performed the work to update existing and develop new internal documents concerning the compliance issues. In 2022, the Anti-Corruption Policy and the Privacy Policy were amended. The amendments concerned the personal responsibility of the Chairman and Vice-Chairmen of the Management Board for corruption offenses committed by their immediate subordinates and for sending the verification materials to competent law enforcement agencies relating to received requests indicating a criminal or administrative offense.

Following the best global corporate governance practices, the Company constantly strives to improve existing corporate standards. Thus, the Policy on transactions with KMG securities was approved.

As part of the creation of an effective system for managing conflicts of interest, as well as determining the requirements for the conduct of employees the compliance with which allows minimizing the risks of making decisions under the influence of personal interests and relationships, since 2020, the Company has been conducting a general declaration of conflicts of interest in relation to all employees of KMG Group of Companies.

In 2022, a survey regarding intolerance to corruption was conducted among 21 companies of KMG with the result that significant risks of corruption were identified and appropriate measures were planned. During the reporting period, one case of corruption was confirmed with a corresponding court decision made.

Commitment to high ethical standards is the basis of good corporate governance and a guarantee in asserting and ensuring the priority of the Company’s interests over personal ones. As part of the promotion of high ethical standards of doing business and non-admission of corruption in any of manifestations thereof and within the framework of communication with the competent authority (Anti-Corruption Agency of the Republic of Kazakhstan), participation was taken in the conferences “State standards and measures to prevent corruption” and “Improving business honesty in the business sector of Kazakhstan”. Similar activities have been carried out in the regions. Thus, in July and October, a meeting was held between the Department of the Anti-Corruption Agency of the Republic of Kazakhstan in Aktobe Oblast and the Prevention Service of the Anti-Corruption Agency of the Republic of Kazakhstan with the personnel of Kazakhturkmunay LLP. In November, a meeting with the manager of the Prevention and Honesty Division of the Department of the Anti-Corruption Agency of Pavlodar Oblast was organized for the employees of PPCP LLP. In October, KPI and AR took part in a forum dedicated to the role of compliance services in protecting the business reputation of the government agencies and big companies, which was organized by the Anti-Corruption Service of Atyrau Oblast; at the end of the forum, the managers of AR, AUO&G named after S. Utebayev and the Anti-Corruption Service in Atyrau Oblast signed a tripartite agreement for cooperation to improve the compliance services in Atyrau Oblast.

In order to improve the efficiency of the Compliance Service of KMG and its SDEs, as well as to strengthen the Company’s control and combat corruption and fraud, in 2022, the webinars were held for the compliance experts of KMG Group of Companies, with the support of the Compliance and Business Ethics Association, on the topic of “Anti-Corruption Compliance”, “Sanction Compliance”, and the Compliance and Security Forum was held.

To differentiate the rights of access to insider information and prevent the possibility of misuse of such information by insiders, a workshop was held for KMG’s employees on the topic of “Insider information: issues of legal regulation and responsibility of the company and its employees-insiders”.

The Compliance Service supports the development of professional competencies and skill improvement of the compliance experts of KMG Group of Companies. To date, the compliance teams comprise the experts holding field-specific international prestigious certificates from the Association of Certified Fraud Examiners (ACFE) and the International Compliance Association (Association of Certified Fraud Examiners, ICA) and their number is constantly growing.

In 2023, the Company will continue to work on further improving the compliance system. The key areas of work will include:

• verification of counterparties taking into account the risk-based approach;
• due diligence of candidates pretending to fill vacant positions before they are hired;
• development of a compliance system at enterprises;
• automation of the compliance procedure for declaring a conflict of interest based on own IT solutions; and
• development of training and communication materials for the compliance program.

In addition, we note that in 2022 the team of the Compliance Service of KMG picked up a special award from the manager of the Compliance Service of Samruk-Kazyna JSC.

Social stability

Each employee of the Company has equal opportunities to exercise his/her rights and freedoms in the labour sphere. In addition, the Company actively participates in negotiations with employees on the conclusion, amendment, alteration of collective agreement, strictly observes the timing of negotiations and ensures the work of the relevant joint commissions, provides the information necessary for negotiations, strictly complies with the terms and condition set forth in provisions of the collective agreement.

Under the labour laws, any employee has the right to participate through his/her representatives in collective negotiations and development of a draft collective agreement, as well as to review the signed collective agreement.

The activities of the Company do not restrict the rights to freedom of association and collective bargaining by type of activity or territory. Being a socially responsible company, we fully support this right and create a favourable environment for the exercise of the employees’ right to freedom of association.

To maintain social stability in the labour collectives of enterprises being members of KMG Group of Companies, the Company is implementing a set of measures aimed at preventing the emergence of discontent and tension among employees of SDEs. The measures taken make it possible to control the situation at the enterprises and ensure the continuity of the production process.

Thus, social support for employees significantly contributes to maintaining the social stability of labour collectives.

Today, collective agreements have been concluded in 24 production enterprises of KMG Group. In 2022, the number of employees of KMG Group of Companies covered by collective agreements was about 44,200 people.

All collective agreements of KMG’s enterprises provide for more than thirty-five basic types of social support for employees and their family members, as well as non-working pensioners.

KMG provides its employees with guaranteed employment benefits, which include various types of social benefits, guarantees and compensations: financial assistance for health improvement in addition to a leave, payments in connection with pregnancy and childbirth, monthly payments to employees who are on a child care leave until a child reaches 1.5 years old, compensation for termination of an employment contract in case of impossibility of transfer to another job due to general disablement, disability, lump sum payment in connection with the death of an employee to organize the funeral, lump sum payment to the family of the deceased employee as a result of an on-the-job accident. The Company also provides social guarantees for voluntary medical insurance in case of illness and for organization of recreation for employees’ children in children’s health improvement camps in Kazakhstan.

In addition, employees may be provided with additional types of social support. These types of social assistance are enshrined in collective agreements or provided for by internal regulatory documents of the entity. Such payments include benefits in connection with reaching the anniversary, retirement age, in connection with marriage, short-term leave on the occasion of a marriage, in connection with a childbirth, in connection with the death of relatives with preserving the salary, for treatment and payment for medical procedures if medical expenses exceed the limit set by the insurance program, payments to disabled employees, employee’s disabled children, employees in desperate need, to purchase school supplies by the first of September, assistance to employees in desperate need, etc.

In 2022, KMG Group retained all social benefits and guarantees and paid them in accordance with collective agreements. In general, in 2022, social support for employees and non-working pensioners was provided in the amount exceeding 24 billion tenge. In 2022, a new of the Collective Agreements of Karazhanbasmunay JSC, Water Production and Transportation Department LLP, KenKurylysService LLP, Kazakhturkmunay LLP, AR LLP, PetroKazakhstan Oil Products LLP, Mangistauenergomunay LLP, Munaitelecom LLP was signed, while the amounts of many social benefits have been increased subject to the current standards in effect within KMG Group.

The implementation of internal socially oriented programs is something special for KMG. In promoting the same, first of all, the emphasis is on creating favourable conditions for the Company’s employees. These are measures of remunerative incentives, consolidation and enhancement of professional growth, ensuring labour safety. The issues of preventing social tension, the emergence of labour disputes and conflicts are within the area of special attention.

A constant constructive relationship has been established with employees and their representatives. A unified system of internal communications is designed to enhance the effectiveness of ‘feedback’. Mandatory scheduled meetings of management with labour collectives are held at all enterprises to discuss social, every-day, and production issues.

The main task of the internal communication system is to timely inform the employees about the goals and objectives of the activity, bring the current situation in the organization to the attention of the employees, as well as the opportunity to ‘hear’ the questions raised by employees.

When working conditions change, the Company shall notify in writing an employee no later than fifteen calendar days in advance. The minimum period to notify of significant changes in the Company’s activities is 4 weeks.

At all production enterprises of KMG, the opportunity for each employee to address questions to the management of the enterprise and receive an answer in a timely manner is regulated by introducing internal communication tools whereby the reporting meetings of the chief executive officers with labour collectives are systematically held twice a year. In 2022, 148 reporting meetings were held. 26,000 people attended the meetings. Approximately 400 questions were received from employees to which appropriate answers were given or which were taken into consideration to be executed and controlled.

Also, in order to create and maintain effective mechanisms for direct communication between employers and employees in SDEs, to inform employees in a timely manner about the goals and objectives of activities in SDEs, to bring the current situation in the organization to the attention of the employees, to form a positive image of the enterprise among employees, to monitor the parameters of the social and psychological climate in labour collectives in SDEs, the employees are received by the chief executive officers of SDEs in charge of personal matters; a blog of the Chief Executive Officer and a corporate information website have been created in each SDE; monitors for video announcements have been installed to bring internal corporate information to the attention of labour collectives. Information stands are used to inform the employees using prompt announcements and messages.

Quarterly meetings of the management with the SDE trade union are held with respect to the most urgent issues regarding the compliance with a collective agreement, the labour discipline, consideration of requests from the personnel, safety and labour protection issues, provision of social benefits and compensations and other socially significant issues at the enterprise.

In order to maintain social stability, the enterprises implemented the Action Plan for 2022 to increase the level of social stability in SDEs of KMG.

When developing this plan, the results of the study of Samruk Research Services¹⁰ conducted by the Centre for Social Interaction and Communication of Samruk-Kazyna JSC in all major SDEs of KMG, were used.

The integral indicator of Samruk Research Services in KMG in the first half of the year, for 9 months of 2022 and at the end of 2022 was equivalent to the same indicator without changes – 74 %.

In general, the level of social stability in KMG’s enterprises is satisfactory. As for social well-being, there is a decrease in personnel satisfaction with the salary level. This is directly related to the last year’s rise in prices for essential foodstuffs and commodities.

Based on the results of the study, for all identified worrisome zones, each enterprise will develop the Action Plan to minimize and eliminate worrisome zones identified while determining the indicators of social stability, which cover the identified problems in the field of activity of enterprises that affect the social well-being of employees (internal communications, food quality, living conditions, provision of personal protective equipment, training, career progress, etc.).

During quarter I in 2022, there were 11 facts of dissatisfaction on the part of employees of SDEs of KMG. To stabilize the situation, negotiations were held with the leaders of trade union committees and meetings with labour collectives. As a result of negotiations, in order to stabilize the situation, ensure the smooth operation of enterprises, as well as prevent further escalation of the labour conflict, it was decided to increase salaries by 30 percent and the situation stabilized as against 2021.

KMG has taken measures to reduce the salary gap between our employees and employees of the contracting companies, a bonus system similar to that of the customers and a guaranteed social benefits have been introduced. As a result, the salaries of employees of contracting organizations were increased by 30-35 % on average. For these purposes, 156 additional agreements have already been concluded with 90 contracting organizations, which required additional costs approximating 35 billion tenge.

In addition to remuneration and social support, one of the important factors in the social well-being of employees implies working conditions, including social and every-day issues. At the fields, especially where the rotational method of work is used, decent board and lodging conditions, sanitary and hygienic facilities, canteens, places for recreation and leisure, and sports are provided.

Trade unions

The Company communicates with the trade unions within the framework of social partnership established by labour laws at the sectoral and regional levels. At the industry level, the basic parameters of communication (social guarantees, labour organization, principles of remuneration, employment, gender and youth policy, safety and labour protection, prevention and resolution of labour conflicts, etc.) are determined in the Industry Agreement in the oil and gas, oil refining and petrochemical industries of the Republic of Kazakhstan in the development of which the representatives of KMG and its enterprises took active part.

The KMG Group has 36 trade union organizations that protect the interests of more than 37 thousand employees.

At the regional level, the regional commissions for social partnership are functioning within which, in addition to regional issues of employment and labour protection, specific collective labour disputes are considered, as well. Conciliation commissions have been formed and are functioning in all companies of KMG.