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Report on compliance with the principles of JSC " Samruk -Energy" Corporate Governance Code in 2012

Report on compliance with the principles of JSC " Samruk -Energy" Corporate Governance Code in 2012. Astana, 2013. Corporate governance Code Principles .

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Report on compliance with the principles of JSC " Samruk -Energy" Corporate Governance Code in 2012

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  1. Report on compliance with the principles of JSC "Samruk-Energy" Corporate Governance Code in 2012 Astana, 2013

  2. Corporate governance Code Principles • JSC “Samruk-Energy” Corporate governance code was approved by resolution of Sole shareholder of “Samruk-Energy” joint-stock company (appendix to the order No.165-P dated November 12, 2007). • The main principles of the Code are: • the principle of protecting rights and interests of shareholders; • The principle of efficient management of the Company by the Board of Directors; • The principle of efficient management of the Company by the Management Board; • The principle of independent activity of the Company • The principle of transparency and fairness of information disclosure on the activities of the Company; • The principle of legality and ethics; • The principle of efficient dividend policy; • The principle of efficient human resources policy; • The principle of the environment protection; • The policy of regulation of corporate conflicts and conflict of interests; • The principle of responsibility

  3. 1. The principle of protecting rights and interests of shareholders Exercising fundamental rights of the Sole shareholder (the JSC "National Welfare Fund" Samruk-Kazyna") is carried out in accordance with the Charter of JSC" Samruk - Energy "(hereinafter - the Company) which clearly defines its relationships with the Company. Information about the Company activity is submitted to JSC "National Welfare Fund" Samruk-Kazyna“ in full and allows to make informed and fair decisions. Two members of the Board of Directors of the six are representatives of JSC "National Welfare Fund" Samruk-Kazyna ". The register of Company's shareholders is kept by an independent registrar JSC "Unified Registrar of Securities". Registrar, having the necessary technical means, allow the JSC "National Welfare Fund" Samruk-Kazyna“ to provide reliable and efficient registration of proprietary rights to the Company. In 2012, there were no appeals of shareholders to public authorities to protect their rights and legal interests.

  4. 2.1The principle of efficient management of the company by the Board of Directors. • The activity of the Company’s Board of Directors is regulated by Provision on the Board of Directors. • The Board of Directors carries out overall management of the Company’s activity, except for matters falling within the exclusive competence of the Sole shareholder and the executive body. • The Board of Directors held 13 meetings and considered 198 issues in 2012. • The activity of the Company’s Board of Directors is based on the following principles: • Maximum respect and promote the interests of Shareholder and the Company; • Protect Shareholders’ interests and responsibility for Company’s activity. • The Company’s Board of Directors consists of six directors, three of them are independent directors. Independence criteria are defined by the legislation of the Republic of Kazakhstan as well as international best practices in corporate governance. • In order to facilitate the effective performance of functions of the Company’s Board of Directors, three committees under the Board of Directors were established for consideration of the most important issues and preparation of recommendations : • The Audit committee • Remuneration and nomination committee • Strategic planning committee • In 2012,10 meetings of the Audit committee were held where 38 issues were considered as well as 6 meetings of the Nomination and remuneration committee (29 issues) and 2 meetings of Strategic planning committee (10 issues). • Internal Audit Service was established in order to present the Board of Directors independent and objective information intended for efficient management of the Company by introducing a systematic approach to the improvement of risks management, internal control and corporate governance systems. • The Internal Audit Service is supervised by the Audit Committee. • In 2012 an independent evaluation of the Board of Directors’ activity in line with international best practice in corporate governance was conducted in the Company for the first time, following which its work has been found efficient and recommendations for further efficient development of the authority were given.

  5. 2.2. The principle of effective management of the Company by the Management Board • Company’s current operations is managed by collegiate body in the form of the Management Board chaired by the Chairman of the Board. • The Board performance is aimed at ultimate serving the interests of shareholders as well as carrying out tasks of the Company and implementation of its strategy. • Company’s Management Board held 21 meetings and considered 139 issues in 2012. • The activity of the Management Board is regulated by the Regulations on the Management Board approved by resolution of the Company’s Board of Directors in 2012 in new edition. • The order and timing of meetings of the Board, responsibility of the Management Board members were revised according to Regulations, as well as basic functions of the Managemetn Board secretary were covered. • The main principles of the Management Board activity are: • Honesty, integrity, intelligencce, diligence, regularity. • Two committees and one council under the Management Board were established: • Committee for Planning and Evaluation of performance (CPEP) • Credit Committee • Investment and innovation council (IIC) • Three committees under the Management Board were additionally established in 2012: • Risks committee; • Committee on management and corporate governance system (CMCGS) • The committee on assets and liabilities management (CALM) • In 2012, 59 meetings of CPEP were held, where 59 issues were considered as well as 8 meetings of Credit Committee (14 issues), 11 meetings of IIC (30 issues), 1 meeting of Risks Committee(7 issues), 1 meeting of CMCGS (7 issues) and 8 meetings of CALM (11 issues).

  6. 3. The principle of independent activity of the Company The Company operates as a separate legal entity. The Company is guided by resolutions of the Fund and the Board of Directors in carrying out its activity. The Company seeks to ensure the availability of market relations with shareholders and the presence of commercial basis in them. In 2012 the Company issued and placed five-year Eurobonds for USD 500 million with a yield of 3.75 % per annum. Received funds will be used to refinance existing loans and implementation of investment programs approved by JSC “National wealth Fund “Samruk-Kazyna” and the Government of the Republic of Kazakhstan. In 2012 the rating agency Fitch Ratings assigned to the Company long-term issuer default rating in foreign and national currency, “BBB” and “BBB+” respectively, and National long-term rating “AAA” (kaz) Forecast on long-term ratings is stable.

  7. 4. The principle of transparency and fairness of information disclosure on the activities of the Company; • The Company shall provide timely disclosure of accurate information about all material facts relating to its operations, including its financial position, performance, ownership structure and management of the Company and other information according to the best practices of corporate governance. This information is published on the official website of the Company. • In 2012, according to the recommendations of an external consultant, in order to comply with the content of the Company's website following the best international practice of disclosure, as well as in connection with the restructuring of the Company, the Board approved a new version of the Rules of preparation and placement of informational materials on the web-site of the Company. • Within the framework of improving the corporate governance system, the Company developed and approved the Information Security Policy in December 2012.

  8. 5. The principle of legality and ethics The relationship between the sole shareholder, member of the Board of Directors and the Management Board are based on mutual trust, respect, accountability and control. The Company operates in strict accordance with the laws of the Republic of Kazakhstan, the generally accepted principles of business ethics and internal documents of the Company. The Company conducts its business recognizing the supremacy of the Constitution, laws and other regulations with respect to internal documents of the Company avoiding the decision-making at the personal discretion of the officers and other employees of the Company. The Company has a Code of Business Conduct. The objectives of the Code of Conduct is to improve, organize and regulate the relations of the Company aimed at improving the effectiveness of corporate governance and the promotion of successful interaction with employees, customers, suppliers, business partners, shareholders, stakeholders and the public authorities through the use of common standards and norms of business behavior. In accordance with the Code, Company's employees have an obligation to respect the rules of the Code. In 2011, the Company introduced the position of the Ombudsman, whose responsibility is to promote the introduction, implementation and interpretation of the Code of Conduct, as well as the collection and review of information about its abuse. In 2012, the Company appointed Ombudsman ShalinErgenSansyzbaevich - corporate secretary. According to information from the Ombudsman, appeals of non-compliance and / or violations of the Code of Conduct, norms of the legislation of the Republic of Kazakhstan and the internal regulations of the Company have not been reported in 2012.

  9. 6. The principle of efficient dividend policy The Company approved the dividend policy which includes a formalized procedure for determining the amount of dividends as well as the general principles of dividends payment. The dividend policy is available on the Company's website and is available for study of shareholders, potential investors and the public of the Republic of Kazakhstan. In 2012 following the Company’s performance results, the Fund has approved the payment of dividends in the amount of 4,456,043 thousand tenge. The amount of paid dividends does not contradict the principles of efficient dividend policy.

  10. 7. The principle of efficient HR policy Matters related to observance of employees rights are crucial in the context of labor relations with the Company. Policies and procedures in the Company are developed taking into account the rights of employees, customers and business partners. The fundamental principles and requirements of the human rights enshrined in the basic regulations, such as: Code of Business Ethics, Employment contracts, Internal work order regulations, procedures in granting leaves to employees and the Regulation on staff business trips. In accordance with the social policy implemented by the Company, its main areas of focus are meeting the needs of staff and improve their health and development of human resources of the Company. The Company has approved the Personnel Policy for 2011-2015 that defines the management system as well as key trends and approaches to human resources management. One of the main tasks of Personnel policy of the Company is to create a uniform system of selection and appointment of personnel which contributes to the effective construction of the organizational structure in the Company’s Group of companies corresponding to strategic direction of development and also allows to effectively manage human resources requirements and make timely selection of specialists who have the necessary knowledge , skills, business and personal qualities. The Company has implemented the principle of open competition for the vacant positions that enables to attract the best-trained and talented professionals. The basic principle of competitive selection is the transparency of competition procedures, the emphasis on professionalism and competence of the candidate. Building an effective system of professional development aimed at meeting the needs of the Company for skilled workers is one of the most important priorities for the Company. According to the result of survey on Company's employees engagement conducted by independent experts in 2012, the index of involvement in respect to the corporate center of the Company amounted to - 72%, satisfaction Index - 78.0%, the loyalty index - 74%, the index of initiative support - 65%.

  11. 8. The principle of environment protection As one of the largest electric power companies in Kazakhstan, the Company is aware of its important role in processes of sustainable development. Protection of the environment and resource management play an important role in the activity of the Company, its subsidiaries and affiliates. The Company has adopted environmental policy. This policy contains the basic principles in the field of environmental protection, as well as the goals, objectives and direction of environmental policy. In 2012 the Company and its subsidiaries and affiliates did not have cases related to penalties imposed for non-compliance of environmental legislation of the Republic of Kazakhstan in conducting its activity.

  12. 9. The policy of regulation of corporate conflicts and conflict of interests; Members of the Board of Directors and the Management Board, as well as employees of the Company shall perform their professional duties in good faith and reasonably with due care and diligence in the interests of the Company and its shareholders, avoiding conflicts of interest and corporate conflicts. The Company has approved a Policy on resolution of corporate conflicts and conflict of interests. The Company has implemented a "hot line" to gather confidential communications. A list of affiliated persons is kept in the Company in order to regulate the conflict of interests. During 2012, the Company has not documented cases of corporate conflicts and conflicts of interests.

  13. 10. The principle of responsibility The Company recognizes the rights of all stakeholders and seeks to work with them to develop its activity and ensure sustainable development. In order to increase transparency to stakeholders, the Company annually presents and publishes on its website a report on sustainable development (application level «B») in accordance with the Guidelines for Reporting GRI 3.1. In case if the rights of employees, partners and third parties are violated, the Company shall pay compensation in accordance with the current legislation of the Republic of Kazakhstan. In 2012, the violation of rights of employees, partners and third parties have not been fixed.

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