Statement of the Management Body Chairman

Statement of the Management Body ChairmanDear readers!Dear colleagues!This report is the first public report in the field of sustainabledevelopment prepared by Samruk-Energo JSC in accordance with theSustainability Reporting Guidelines under the Global reporting initiative(hereinafter referred to as the GRI).The purpose of this report is not only to demonstrate transparentmechanisms of interaction and mutual relationship of our Company withthe parties involved by means of information provided but to carry outfurther improvement of the corporate governance system.As one of the biggest electric power companies of the Republic ofKazakhstan, we realize that “Samruk-Energo” JSC’s activities have animpact on environmental and social development factors, as well as on welfare of Kazakhstan’s population life inthe presence regions.Our Company’s strategic priorities in the field of sustainable development include compliance with the legislationnorms, progressive introduction of high standards of environment and industrial safety in production activitiesand implementation of new investments projects.At present, Samruk-Energo Group of Companies generates 12,686 million kW-hours that is about 18% of thetotal power generation in the Republic of Kazakhstan. In the longer term, Samruk-Energo Group of Companiesplans to take the first place in power generation in Kazakhstan and in Central Asia. One of the steps onimplementation is construction of the Balkhash CHP-Plant and the Moynak HPP. In 2011, it is planned toinitiate an issue on placement of Samruk-Kazyna National Welfare Fund JSC’s shares in GRES-1 JSC in theGroup’s management. As a result, as early as the nearest several years, the Group will produce up to 50% ofelectric power in the Republic of Kazakhstan.The next priority target is increasing efficiency of Samruk-Energo Group of Companies. Energy saving, combatingabove-standard electric power losses in distribution mains and introduction of modern management technologiesare the key to improvement of the Group’s financial stability.Our Company’s strategic priorities also include social responsibility to public and other parties involved. Inpractice, maintenance of the “socially responsible” mandate implies not only carrying out activities but organiccombination of its activities with social and economic development of our presence regions. For further increaseof the image we will participate in implementation of infrastructural regional projects, invest in social sphere andimplement charity programs and take care of people’s safety, for providing conditions favorable for sustainabledevelopment in any geographical point of its presence.Besides, to provide sustainable progressive development of the Company, we need to closely interact with thepublic, taking into consideration regional interests. Without any doubt, the key role in the sustainabledevelopment of the Company is played by our employees, since the efficient team is the main condition for theCompany’s efficiency.Publishing of the first Report on sustainable development of our Company confirms the Company’s commitment tobeing socially responsible ensuring meeting the needs of the current generation without prejudice to futuregenerations’ possibility to satisfy their own needs.Summarizing the above mentioned, I would like to thank the Company’s team for efficient and professional workin 2010. I am sure that together with such a team we are able to achieve large-scale objectives.1

Erlan Elemesovich UpushevSamruk-Energo JSC Management Body Chairman2

1. About the Report5

About the ReportA Report on sustainable development is published for the first time and is a review ofSamruk-Energo Group of Companies’ outcomes of activities and achievements from 1January to 31 December 2010.Within the framework of this Report, information and indicators in the field of economy,ecology, industrial safety and occupational health and safety as well as corporate socialresponsibility are presented. The information and quantitative data are provided for theperiod of 2010, however, for the purpose of comparison and analysis of information,some indicators used data for 2009.Reporting cycleSamruk-Energo JSC plans to prepare a Report on Sustainable Development on the annualbasis.The Report content defining processThis Report has been prepared in accordance with the principles of the Global reportinginitiative (GRI). For preparation of the Report on Sustainable Development, Samruk-Energo JSC based itself upon using the third version of the Sustainability ReportingGuidelines under the Global reporting initiative (G3) and the sectoral protocol in thesphere of electrical energy industry (Electric utility, EU). The table showing location ofstandard elements in the Report is demonstrated in the Annex 1: Table of the ReportCompliance with the GRI Guidelines.When defining significance of information in the Report, Samruk-Energo JSC based itselfon those aspects which are topical for the parties involved. This Report mostly reflectsinformation of social and environmental character on the Company’s activities.Information on economic aspects of the Company’s activities is provided in part. Moredetailed information on economic indicators is provided in the consolidated financialstatements as of December 31, 2010, which were prepared in accordance with theInternational Financial Reporting Standards (http://www.samrukеnergy.kz/cont/publish244074_12.pdf).The Report boundariesSamruk-Energo JSC is a managing company and it does not carry out industrial activitiesthus having an insignificant impact on environment. For the purposes of full disclosureof indicators in the sphere of sustainable development in this Report, the consolidatedinformation on Samruk-Energo Group of Companies is provided. An exception ispresented by the organizations, which:Are managing companies («Forum Muider B.V.»);Are under leasing and concession (Bukhtarminskaya HPP JSC, Shulbinskaya HPP JSCand Ust-Kamenogorsk HPP JSC);Have a status of a facility under construction (Balkhash CHP-Plant JSC and MoynakHPP JSC);Are in the process of liquidationEnergy Center JSC).(KazKuat JSC, KMG-Energo JSC and EkibastuzThis Report is published for the first time, in this connection, an issue on significantchanges with regard to previous periods of reporting in the sphere of coverage and limitsis not applicable.6

CompulsoryPossibleThe Report has been externally confirmedThe Report has been externally confirmedThe Report has been externally confirmedData measurement and calculation methods, including assumptions and techniquesapplied to compilation of indicators and other information included in the ReportCalculation, collection and consolidation of production, social and environmentalindicators shown in the Report on Sustainable Development by Samruk-Energo JSC werecarried out in accordance with the requirements of the Sustainability ReportingGuidelines under the Global Reporting Initiative (G3) third version and in line with thecorporate governance procedures of Samruk-Energo JSC. Quantitative data inaccuracyprobability on each indicator category in the field of sustainable development has beenminimized. Relations and specific figures are supplemented with absolute values.Quantitative data are reflected using the generally accepted unit measurement systemand are calculated with the help of standard coefficients.The policy and applied practical approaches in regard to external approval of theReportThis Report has been prepared in accordance with application level B.The Company’s plans include conducting external certification of the Report with regardto fullness and reliability of the information provided. All procedures on certification ofthe Report to be conducted by an external party, and the results will be communicatedto all parties involved.С С+ B B+ A A+SelfdeclarationReview by athird partyReview byGRI7

2. About theCompany8

About the CompanyAs for the legal organizational form, Samruk-Energo is a joint stock company registeredin accordance with the legislation effective in the Republic of Kazakhstan. Samruk-Energo JSC was established on April 18, 2007 and registered on May 10, 2007 forconsolidation of energy assets included in the structure of Kazakhstan Holding forSamruk Government Assets Control JSC and KazTransGas JSC.On November 3, 2008, as a result of reorganization conducted by means of merging ofKazakhstan Holding for Samruk Government Assets Control JSC and Kazyna SustainableDevelopment Fund JSC, the biggest shareholder of Samruk-Energo JSC became Samruk-Kazyna National Wealth Fund JSC (hereinafter referred to as the Fund), the successor ofKazakhstan Holding for Samruk Government Assets Control JSC.As of 31 December 2010 the shareholders of Samruk-Energo JSC were as follows:Samruk-Kazyna National Wealth Fund JSC (92.61%);KazTransGas JSC (7.39%).Shares of KazTransGas JSC were placed into trust of Samruk-Kazyna National WealthFund JSC. Therefore, the Fund manages 100% shares of Samruk-Energo JSC.Samruk-Energo JSC is a holding company managing energy and coal organizations inthe territory of the Republic of Kazakhstan. As of December 31, 2010, the Groupincluded 19 organizations, with regard to three of them (KazKuat JSC, KMG-Energo JSCand Ekibastuz Energy Center JSC), a decision was made on voluntary liquidation.The basic objectives of Samruk-Energo JSC are optimization of the corporatemanagement, development and implementation of a long-term program onmodernization and construction of generation capacities in the Republic of Kazakhstan.Samruk-Energo Group of Companies’ activities are of a great social and economicsignificance for the Republic of Kazakhstan. Samruk-Energo Group of Companiesrenders services to both legal entities (generation of electric and thermal power -HPPs, TPPs and GRESs), individuals (transportation and distribution of electric power- HPPs, TPPs and GRESs) and individuals (transportation and distribution of electricpower – EDC, selling electrical and thermal power –AlmatyEnergoSbyt LLP).The basic types of Samruk-Energo Group of Companies’ activities are as follows:Production of electrical and/ or thermal power:Almaty Electric Stations JSC;Aktobe TPP JSC;Zhambyl GRES named after T.I. Baturov JSC;Ekibastuz GRES-2 Power Station JSC;Shardarinskaya HPP JSC;Shulbinskaya HPP JSC;Bukhtarminskaya HPP JSC;Ust-Kamenogorsk HPP JSC.Distribution and transportation of electric power:Alatau Zharyk Kompaniyasy JSC;Mangistau EDC JSC.9

Electrical power supply:AlmatyEnergoSbyt LLP.Coal mining:Bogatyr Komir LLP.Reconstruction and modernization of electric energy complex facilities:SamrukEnergoStroyService LLP.For the purpose of meeting the demand for electric power, Samruk-Energo JSC initiateda number of projects on putting into operation of generation capacities:Balkhash CHP-Plant JSC;Moynak HPP JSC.The basic regions of their activities are as follows: Almaty, Pavlodar, East-Kazakhstan,South-Kazakhstan, Zhambyl, Mangistau, Aktobe provinces and Almaty city.The headquarters of the Samruk-Energo Group of Companies’ management is located atthe following address:Block E, Luk Oil Business Center,Bldg. 17, Kabanbay Batyr ave., Astana, 010000,Phone numbers:+ 7 (7172) 55-30-00+ 7 (7172) 55-30-21Fax: +7 (7172) 55-30-30e-mail:info@samruk-energy.kzFor any further information with regard to the Report or its contents, please feel free tocontact the following person:Nikolay Nikolayevich Zheltiakov, General ManagerDepartment for Corporate Governance and Prospective DevelopmentTelephone: +7 (7172) 55-30-8310

1.1. Functional Structure of the Company:StateSamruk-Kazyna National Welfare FundJSCKazTransGas JSCSamruk-Energo JSC 100%92,61% 7,39%Alatau ZharykKompaniyasy JSC100%100%Balkhash CHP-Plant JSC100%Almaty Electric StationsJSC92,14%Shulbinskaya HPP JSC100%Aktobe TPP JSC100%50%Forum Muider B.V.Company100%Bogatyr Komir LLPTotal workforce numberKazKuat by employment ТЭЦ type inUnder liquidation 2010SamrukEnergoStroyServiceLLPShardarinskaya HPP JSCUnder liquidationKMG-Energo JSCUnder liquidation100% 100%AlmatyEnergoSbyt LLP90%89,99%75% + 1 акция51%50%50%Bukhtarminskaya HPPJSCTotal number ofemployees by laborUst-Kamenogorsk agreement type in HPP 2010JSC (permanent, provisional)3. NUMBEROF EMPLOYEES OFMangistau EDC JSCSAMRUK-ENERGO GROUP OFCOMPANIES BY KAZAKHSTANREHUMA7. NLABOR RIGHTMANAGSEMENTMoynak HPP JSCZhambyl GRESnamed after T.I. Baturov JSC50%Ekibastuz GRES-2 PowerStation JSCEkibastuzsky EnergyCenter JSCUnder liquidationSAMRUK-ENERGOJSCBUILDSITSACTIVITIES BASEDONLEGISLATIVEREQUIREMENTS FORPREVENTION OFANYFORMS OFHUMANRIGHTSABUSE.IN 2010THERE11

1.2. Scale of the OrganizationThe number of employees in Samruk-Energo Group of Companies2010 2009Change forthe yearTotal number 18 044 17 674 370For the purpose of reporting to the Fund, in accordance with the established form,Samruk-Energo JSC provides data on the personnel number on the basis of the equitymethod. Thus, the consolidated Development Plan and the Annual report for 2010 onSamruk-Energo Group of Companies accounts 13,348 employees and does not includefull staff number of the following companies (total 4,696 employees):Bogatyr Komir LLP;Shulbinskaya HPP JSC;Bukhtarminskaya HPP JSC;Ust-Kamenogorsk HPP JSC;Mangistau EDC JSC;Moynak HPP JSC;Zhambyl GRES named after T.I. Baturov JSC;Ekibastuz GRES-2 Power Station JSC.For the purpose of full disclosure of all sustainable development aspects, this Reportcontains information on full staff number of all branch and related organizations.Consolidated operating profit for the year2010 2009MeasurementunitOperating profit for the year 10 862 559 (1 429 656) KZT thousandIn 2009, the Group incurred a loss in the amount of KZT1.4 billion, that was related todevaluation of Kazakh tenge and, as a result of such devaluation, it led to significantexpenses on exchange rate difference in the amount of KZT14.5 billion.Income from operating activities in 2010 made up KZT76.9 billion, that exceedsindicators for 2009 by 19%. Increase of income is related to growth of productionvolumes and raising of tariff rates for electric power production. As a result, Samruk-Energo JSC’s consolidated operating profit in 2010 made up KZT10.9 billion.12

Production indicators for the year2010 2009Change forthe yearElectric power production (mln. kW h) 12 686 11 628 1 058Realization of electric power (mln. kW h ) 4 993 4 950 43Production of thermal energy (ths. Gcal) 7 460 7 616 (156)Provision of electricity transmission services (mln. kWh)7 547,5 7 382 165,5Coal production (mln. tons) 38,9 34,7 4,2Rated (production) capacity2010 2009MeasurementunitHPP 511 511 MWGRES 2 230 2 230 MWTPP 930 930 MWCoal strip mine 42 000 42 000 ths. tonsProduction (output)2010 2009MeasurementunitHPP 2 667 1 704 GWhGRES 5847 5822 GWhTPP 4122 4102 GWhCoal strip mine 38 888 34 687 ths. tonsThe number of household, industrial, institutional and commercial consumers2010 2009MeasurementunitDomestic consumers 16 813 16 620 consumersIndustrial consumers 440 438 consumersInstitutional consumers 233 232 consumersCommercial consumers 937 940 consumersLength of power transmission lines and distribution linesType of linesLength of lines over 66kVLength of lines less than66 kV2010 2009 2010 2009Unit ofmeasureOverground 5 962 5 970 24 392 25 725 kmUnderground 58 0 3 852 3 847 kmThe cumulative length of lines 6 020 5 970 28 244 29 572 km13

Total cost of assetsAccording to the results of the year 2010, the Company’s assets made up 244 billionKazakh tenge that is higher than the indicator of the year 2009 by 60.7 billion Kazakhtenge, or by 25%. Increase of the Company's assets was due to implementation ofmajor investment programs, in particular, due to commissioning of the following powersupply facilities:Four substations for Asiad 2011;The Novaya substation for uninterrupted supply of the Underground facilities inAlmaty with electric power.The following facilities account for the basic share of the assets increase:AZhK JSC – 26%;AlES JSC –22%;Moynak HPP JSC –13%.2010 2009Significant changes of scale, structure or ownership taken place through thereporting periodThe basic events which influenced the size, structure or property of Samruk-EnergoGroup of Companies for the reporting period were as follows:On February 4, 2010, Samruk-Energo JSC’s Management Body made a decision tosign a Loan Agreement with the Fund for refinancing of liabilities (Minutes No.2),related to purchase of 50% of shares of Forum Muider B.V. company, owningBogatyr Komir LLP.On March 12, 2010, the Board of Directors of Samruk-Energo JSC made a decisionon liquidation of KazKuat JSC (Minutes No. 31) with transfer of shares ofShardarinskaya HPP JSC and Moynak HPP JSC into ownership of Samruk-Energo JSC.On July 26, 2010, the Board of Directors of Samruk-Energo JSC made a decision onliquidation of KMG-Energo JSC (Minutes No.37) with transfer of the equity share ofAlmatyEnergoSbyt LLP and SamrukEnergoStroyService LLP into ownership ofSamruk-Energo JSC.1.3. Awards Received in the Reporting PeriodUnit ofmeasureCost of assets 244 049 321 182 998 205 тыс. тенгеOrganizationEkibastuz GRES-2 PowerStation JSCBogatyr Komir LLPBogatyr Komir LLPAward formAward winner of the competition on business social responsibility“Paryz-2010”.Diploma of the fourth annual National Social Award “Golden Heart” inthe nomination “For sports development and support”.Diploma “Trust – 2010” in the nomination “The Best НR-Project”,which was awarded the third place on the “Personnel Training andDevelopment” Project.14

3. Description of KeyImpacts, Risks andOpportunities15

Description of Key Impacts, Risks andOpportunitiesSamruk-Energo JSC’s activities are connected with risks and opportunities which mayhave a material impact on production and financial results of the Company. For thepurpose of prevention from and minimization of risks, in 2010, the Company introduceda complex risk management system, targeted at creation of favorable risk culture,identification, assessment and management of material risks of Samruk-Energo JSC.The Company’s high-priority objective was creation of a favorable risk culture amongthe personnel of Samruk-Energo Group of Companies. To improve the risk culture in theCompany, training workshops in the sphere of risk management in electric power sectorfor the key personnel of Samruk-Energo JSC and its subsidiaries were conducted. Theworkshops disclosed basic principles of risk identification, risk assessment andmethodology of development of the Risk Register and the Risk Map. Besides, thetheoretical constituent, the workshop contained practical tasks which allowed thetrainees to solidify theoretic knowledge in the sphere of risk management.The objective of the following stage was to identify risks peculiar to Samruk-EnergoJSC’s activities as well as to activities of its branch and related organizations. On thebasis of conducted interviews and analysis of Samruk-Energo Group of Companies’activities, Risk Registers of Samruk-Energo JSC and its branch and related organizationswere developed. On the consolidated level, 67 risks were identified in the field ofstrategic planning, operating, legal and financial activities. Besides, a risk classifier wasdeveloped which allowed to conduct a more detailed grouping of Samruk-Energo JSC’srisks.Within the framework of the following stage, the key employees by an expert wayconducted full assessment of the risks identified, which allowed to make risks rating inaccordance with their significance. In addition, an approach to quantitative andqualitative risk assessment was developed as well as normative documentation: Policyon risk management and Rules of risk identification and assessment of Samruk-EnergoJSC. The approved normative documentation in the field of risk management isaccessible at the corporate website www.samruk-energy.kz.The Company’s highpriorityobjective wascreation of a favorable riskculture among thepersonnel of Samruk-Energo Group ofCompanies.At present, the most significant risks are operating risks, related to productionaccidents and capital equipment faults. It is connected with the fact that within along period of time, the electric-power industry in the Republic of Kazakhstan was notupdated and reconstructed sufficiently. Besides, new electric power facilities werenot introduced; many specialized repair services, construction and mountingenterprises were dissolved and deskilled. There were no systemic training ofmanagerial cadres and regular labor force for electric-power industry. All the abovementioned factors brought to depreciation of the capital equipment of electric-powerindustry enterprises. Along with those factors, Samruk-Energo JSC’s activities areexposed to financial risks which is related to availability of a great number of majorinvestment projects. For the purpose of obtaining a more accurate assessment offinancial risks, the Company plans to conduct a quantitative assessment of financialrisks using the advanced methods, such as: Value-at risk, stress testing and gapanalysis.For the purpose of management of the above mentioned risks, the Company developedvarious Plans of activities targeted at minimization of risk event impacts.For the purpose of further improvement of the risk management system, themanagement of the Company decided to carry out the following operations, which willallow to increase efficiency of the existing corporate risk management system:1. To create a separate structural division responsible for all aspects of the riskmanagement process organization in Samruk-Energo JSC;16

2. To organize collection and analysis of reports and statements on realized risks andreplenishment of the statistics base for conducting a more accurate quantitative riskassessment;3. To automate some specific processes of risk management in Samruk-Energo JSC;4. To develop and introduce the key risk indicators of Samruk-Energo JSC;5. To conduct an independent evaluation of the risk management system efficiency inSamruk-Energo JSC.17

4. CorporateManagement18

Corporate ManagementManagement structure of the organization, including basic committees under thesupreme management body responsible for specific missions, such as strategydevelopment or general supervision of the organization’s activities.In accordance with the Charter of Samruk-Energo JSC approved by the General Meetingof Founders on April 18, 2007, the Company’s bodies are as follows:1. The supreme Body – the General Shareholders’ Meeting;2. The management Body – the Board of Directors;3. The executive Body – the Management Body;4. The Internal Auditing Service.4.1. The Company’s structure is as follows:General Shareholders’ MeetingОбщее собрание акционеровСовет директоровBoard of DirectorsBoard of Directors CommitteesAuditing CommitteeAppointment CommitteeRemuneration CommitteeInternal Auditing ServiceCorporate SecretaryПредседатель ПравленияManagement Body ChairmanПравлениеManagement BodyFirst DeputyManagement BodyChairmanDeputy Management BodyChairman on Finance and EconomyManaging Director onProspectiveDevelopment4.2. Board of Directors6.The Board of Directors carries out strategic management ofemploymentSamruk-EnergotypeJSC. TheBoard of Directors’ tasks are protection and adherence to shareholders’ rights,in 2010determination of priority targets of activities and increase of the level of theENVIRONCompany’s corporate management.MENTALIMPACTTotal workforcenumber byThe Company Board of Directors comprises 6 members. The members of the CompanyBoard of Directors are elected by the General Meeting of Shareholders.19

The Members of the Board of Directors as of December 31, 2010:T.A. KulibayevSamruk-Kazyna National WealthFund JSC Deputy ManagementBody Chairman, Chairman of theCompany’s Board of Directors.First election date: 21.05.2009.D.R. AbulgazinSamruk-Kazyna NationalWealth Fund JSC ManagingDirector.First election date:13.08.2010.E.E. UpushevManagement Body Chairman ofthe Company.First election date:04.07.2007.D.N. TurganovVice Minister of Industry andNew Technologies of theRepublic of Kazakhstan.First election date:14.11.2007.G.Zh. DaukeyevPresident of Almaty Universityof Energy andCommunications, IndependentDirector.First election date:22.01.2008.E.O. IsekeshevManaging Partner of FalahPartners Investment Fund,Independent Director.First election date:02.04.2009.In accordance with the decision made by the Management Body of Samruk-KazynaNational Wealth Fund JSC (Minutes No. 47/10 dated 13.08.2010), the powers of BolatUralovich Akchulakov were early terminated, and Daniyar Rustemovich Abulgazin waselected as a member of the Company Board of Directors.4.2.1. Board of Directors CommitteesTo support the Board of Directors’ activities, three committees were formed: theAuditing Committee, the Appointment Committee and the Remuneration Committee.Each committee functions within the framework of its responsibilities and rightsspecified in the Provision of each committee and approved by the Company Board ofDirectors.20

4.2.2. Auditing Committee MembersIn accordance with the resolution of the Company Board of Directors (Minutes No. 19 ofthe Board of Directors dated October 30, 2008), the Auditing Committee was formedcomprising the following members:E.O. Isekeshev – Independent Director, Auditing Committee Chairman;G.Zh. Daukeyev – Independent Director, Auditing Committee Member;V.M. Kuzmin – Committee Expert without vote.Auditing Committee’s number of meetings2010 2009Number of meetings 5 1Meeting in presentia 0 1In absentia 5 0Attendance of Committee members entitled to vote 100% 100%4.2.3. Appointment Committee MembersIn accordance with the resolution of the Company Board of Directors (Minutes No.26 ofthe Board of Directors dated October 8, 2009), the Committee on Appointments wasformed comprising the following members:G.Zh. Daukeyev – Independent Director, Chairman of the Committee onAppointments;E.O. Isekeshev – Independent Director, Committee on Appointments Member;O.V. Amerguzhina – Committee Expert without vote.Auditing Committee’s number of meetings2010 2009Number of meetings 5 1Meeting in presentia 0 1In absentia 5 0Attendance of Committee members entitled to vote 100% 100%4.2.4. Committee on Remunerations MembersIn accordance with the resolution of the Company Board of Directors’ in absentiameeting (Minutes No. 19 of the Board of Directors dated 30 October 2008), theRemuneration Committee was formed comprising the following members:N. Stapleton – Independent Director, Remuneration Committee Chairman;G.Zh. Daukeyev – Independent Director, Appointment Committee Member.On April 7, 2009, the Fund made a resolution “On optimization of the managementstructure and costs reduction in organizations of the Fund’s group”. On the basis ofthis resolution, a moratorium was declared on all payments of bonuses to managerialpersonnel of Samruk-Energo JSC for 2008-2010. As a consequence, the Committee onRemunerations for the period through 2009-2010 did not conduct any meetings, andfunctioning of the Committee was de jure only.21

4.3. Internal Auditing ServiceThe Internal Auditing Service is a body carrying out control over financial and economicactivities of the Company, evaluation in the field of internal control, risk management,compliance with the normative documentation in the sphere of corporate managementand rendering consultations for the purpose of improvement of the Company’sactivities.As of December 31, 2010, the Internal Auditing Service comprised a chief, a chiefmanager and a manager.All employees of the Internal Auditing Service are appointed by the Company Board ofDirectors. The Internal Auditing Service shall report to the Audit Committee of theCompany Board of Directors.The main functions of the Internal Auditing Service are as follows:Evaluation of adequacy and efficiency of the Company's internal control system;Assessment of completeness and efficiency of the risk assessment methodology andrisk management procedures in the Company;Check for compliance with the requirements of the legislation effective in theRepublic of Kazakhstan, international agreements, the Company's internaldocuments, and execution of instructions issued by authorized and oversight bodies,decisions of the Companies’ bodies and assessment of systems designed to complywith these requirements;Evaluating adequacy of measures used by the Company units to ensure achievementof their objectives within the strategic goals of the Company;Evaluation of introduction of and compliance with the accepted principles ofcorporate management, appropriate ethical standards and values in the Company;Consultation of the Board of Directors, Management Body, structural divisions of theCompany and branch and related organizations of Samruk-Energo JSC on issues oforganizing the internal control and internal audit issues.In 2010, the Internal Auditing Service conducted comprehensive audits of businessactivities of branch and related organizations, as well as independent audit of thefinancial and investment cycle of the Company. In accordance with the outcomesof performance of the audit engagements, the Internal Auditing Service provided 34recommendations targeted at improvement of efficiency and reliability of theinternal control system. The Internal Auditing Service carries out monitoring offulfillment of the recommendations made on the basis of audits, andrecommendations of the external auditor on the quarterly basis.Meetings of the Internal Auditing Service with the members of the AuditingCommittee are conducted regularly on the issues of the Internal Auditing Serviceactivities. Jointly with the Chairman of the Auditing Committee, awareness-raisingmeetings were conducted with the management of branch and related organizationsfor the purpose of determination of the fields for improvement in their activities.22

4.4. Management BodyThe Management Body is a Collegial Executive Body of the Company. The ManagementBody members are appointed by the Company Board of Directors.The number of the Management Body is determined by the Company Board of Directorsupon proposal of the Management Body Chairman, and as of 31 December 2010, it wasdetermined in the number of four people.Company Management Body MembersManagement Body Members’ Terms of ReferenceE.E. UpushevManagement Body ChairmanImplementation of strategic initiativesdetermined by the Board of Directorsand Shareholders;Personnel policy;Enhancement of performance efficiency.E.A. AbitayevFirst Deputy Management BodyChairmanTechnical and technological upgrading ofproduction;Ecology and Environment Protection;Occupational health and safety.K.B. MaksutovDeputy Management BodyChairman on Economy andFinanceBudgeting and planning;investment activities;Internal control;Risk management;Treasury operations.‣ Управление рисками.A.I. LeeManaging Director onProspective DevelopmentCorporate management;7. LaborTotal number ofLong-term development;employees Renewable by labor energy agreement sources. type in2010(permanent, provisional)4. HUMANRIGHTSSAMRUK-ENERGO JSC BUILDS ITSACTIVITIES BASED ON LEGISLATIVEREQUIREMENTS FOR PREVENTIONOF ANY FORMS OF HUMAN RIGHTS23

Number of meetings of Samruk-Energo JSC’s Management Body2010 2009Number of meetings 33 364.4.1. Management Body ChairmanSamruk-Energo JSC’s Management Body Chairman carries out management of the dayto-dayoperations of the Company.The basic functions of the Company Management Body Chairman are implementation ofstrategic initiatives determined by the Board of Directors and shareholders, humanresources policy and enhancement of performance efficiency in Samruk-Energo Groupof Companies.4.4.2. Combination of positions of the Board of Directors Chairman andManagement Body ChairmanFor the purpose of segregation of powers and avoiding a conflict of interest, thepositions of the Chairman of the Board of Directors and the Chairman of theManagement Body shall not be combined in accordance with the Charter and internalnormative documents.In 2010 the Chairman of Samruk-Energo JSC Board of Directors was T.A. Kulibayev,while the Chairman of the Management Body was E.E. Upushev.24

4.4.3. The number of independent members of the Board of DirectorsThe Company considers a director as independent if he/ she conforms to the basiccriteria of independence of directors specified in the Republic of Kazakhstan Law “Onjoint-stock companies”, and requirements of corporate management best practices, inaccordance with which, a member of the Board of Directors is not affiliated if he/ she:Has not been a head or a worker, or a spouse, one of the parents, children,brothers and/or sisters of the head of a worker of the Company and branch andrelated organizations for the last five years;Has not been an affiliate of the Company’s major client or supplier or its affiliatedpersons for the last five years;Is not at the same time an affiliate of a non-profit organization receiving significantfinancing from the Company or from its affiliated persons;Does not render any paid services (consulting, etc.) to the Company and itsaffiliated persons;Is not an official of a legal entity (organization) in which the Company’s employeeholds a post of a member of the Board of Directors;Has not been an affiliate or an employee of the current or former auditor of theCompany or its affiliated persons for the last five years;Is not a person controlling the Company (or a member of a group of individuals orlegal entities that together may carry out actual control over the Company), anyrelative or any of the listed persons/entities, a heir, a successor, an executor or alegal representative;Is not an affiliated person (employee or a related person) of any particularshareholder;Is not a representative of the state;The Company Board of Directors comprises:Two directors who are representatives of the Fund (T.A. Kulibayev and D.R.Abulgazin);One director who is a representative of the relevant ministry (D.N. Turganov);One director who is a member of the executive body (Management Body Chairman –E.E. Upushev);Two directors who are independent (E.O. Isekeshev and G.Zh. Daukeyev).25

4.4.4. Mechanisms that shareholders or employees of the organization can use todirect the supreme governing body activities or provide it with recommendations.The Company’s principal shareholder developed “The procedures of interaction onissues of ensuring activities of representatives of Samruk-Kazyna National Wealth FundJSC in Boards of Directors and Supervisory Boards of companies of Samruk-Kazyna JSCGroup (approved by decision of the Management Body of Samruk-Kazyna JSC datedSeptember 3, 2010, Minutes No.53/10). This document regulates:Providing materials for meetings of representatives of Samruk-Kazyna NationalWealth Fund JSC, and allowed possible number of issues to be raised at themeeting;Interaction with Samruk-Kazyna National Wealth Fund JSC’s structural divisions, inthe part of provided materials to the representatives of Samruk-Kazyna NationalWealth Fund JSC;Interaction with Samruk-Kazyna National Wealth Fund JSC’s Committees;Procedures of initiating issues by Samruk-Kazyna National Wealth Fund JSC forsubmission thereof for consideration of the Company Boards of Directors/Supervisory Boards.Special mechanisms with the help of which employees may give recommendations tothe members of the Board of Directors are not applied in the Company. At the sametime, the management system does not have any restrictions for bringing employees’opinions or concerns to the notice of the Board of Directors.4.4.5. Management Body and Board of Directors Motivation SystemIn connection with adoption of a regulation “On optimization of the managementstructure and cost reduction in organizations of the Fund group” dated 07.04.2009, theprincipal shareholder of the Company declared moratorium on all payments of bonusesto managerial personnel of Samruk-Energo JSC for 2008-2010. Thus for the period ofexistence of Samruk-Energo JSC (2007-2010) remunerations were not paid to theleadership.4.4.6. Conflict of interests prevention practiceThe Practice on prevention of arising a conflict of interest is rigorously complied withby all the personnel irrespective of their status and position, and it covers all aspects ofthe Company’s activities starting with employment of personnel and ending withprocurement performance. Deliberate actions targeted at violation of requirements ofthe Business Conduct and Corporate Management Codes are considered by the Companyas a disciplinable offense which may lead to holding liable and bringing to responsibilityas stipulated by the legislation effective in the Republic of Kazakhstan.26

The main goal of the Companycorporate governance systemimprovement is increase of thecurrent rating level. By 2015, theCompany plans to be among thetop five best companies of the FundGroup in accordance with thecorporate management rating.For the purpose of informing employees, the Company has developed the Code ofBusiness Conduct and the Corporate Management Code regulating policies in the sphereof a conflict of interest. A template contract specifies employees’ liabilities oncompliance with the provisions of the Code of Business Conduct and the CorporateManagement Code.An example of an evidence of compliance with the provisions of the Code of BusinessConduct and the Corporate Management Code is the practice of discussion of theamount of remuneration to the executive body at the Company Board of Directorswhere the Management Body Chairman is absent when the amount of remuneration andother bonuses payable to him/ her is discussed and determined.Responsibility for monitoring of compliance by employees with the provisions of theCorporate Management Code rests with the Department for Corporate Management andProspective Development. In accordance with the results of 2010, the Department forCorporate Management and Prospective Development prepared a Report on compliancewith the corporate management principles which will be submitted to Samruk-EnergoJSC Board of Directors. In future, the Company is planning to prepare such a report forthe Board of Directors on the regular basis.The Company has developed a list of affiliates including officials of Samruk-KazynaGroup and their family members, updates it continuously. On the quarterly basis, theDepartment for Corporate Management and Prospective Development submits this listto the Board of Directors and to the Agency of the Republic of Kazakhstan onregulation and supervision of financial market and financial organizations.On the quarterly basis, the Legal Department submits to the Board ofDirectors a report containing information on transactions with regard to whichthere is an interest. This Report includes all transactions made between thecompanies of Samruk-Kazyna Group.In 2010 there were no events of a conflict of interest in Samruk-Energo Groupof Companies.4.4.7. Board of Directors Qualifications.By now, the Company has not approved a formalized process of selection ofcandidates to the Board of Directors and selection criteria applied to them.Constant work of the major shareholder targeted at improvement of thecorporate management system creates pre-requisites to improve from year toyear not only the internal normative and legal base in accordance with thebest practices, but to enhance efficiency of the Company’s business processes. In thisconnection, the Company is going to demonstrate vivid changes in this issue by themoment of preparation of the next Report on Sustainable Development.In turn, as of December 31, 2010, the Board of Directors comprised:E.O. Isekeshev, Expert in the field of economy, finance and audit – ManagingPartner of Falah Partners Investment Fund;D.N. Turganov, Environment Expert – Vice Minister of Industry and NewTechnologies;E.E. Upushev, Expert it the field of corporate social responsibility – the ManagementBody Chairman, directly supervising the Department for Human ResourcesManagement and aspects related to sponsorship and charity.Thus, the Company Board of Directors has sufficient qualifications and knowledge fordetermination of Samruk-Energo JSC’s strategy in the field of economy, environmentand corporate social responsibility.27

4.4.8. Samruk-Energo JSC’s Mission and VisionThe mission and vision plays a great role in the Company’s development, which aredirecting vectors and the basis for determination of strategic goals and developmentplans.At present, the Development Strategy of Samruk-Energo JSC for the period through2011-2020 fixing the mission and vision is at the stage of development. In accordancewith the long-term Development Strategy under development, Samruk-Energo JSC hasdetermined a mission and vision for itself, the formulation of which is provided below.Mission: Providing efficient, reliable and balanced production of heat and electricpower energy in accordance with the modern technical, economic and environmentalrequirements and standards.Vision: Becoming a leading electricity generator Company in Kazakhstan and CentralAsia executing researches, construction and operation of electric power facilities.The Code of Business Conduct developed in accordance with the world best practicesfixes the Company’s rights to support socially significant projects and initiatives in thefield of ecology and environment protection. In the process of employment, provisionsof the Code of Business Conduct are compulsorily brought to the notice of theemployees. In future, the Department for Human Resources Management plans toconduct testing of employees of the Central Management Office of Samruk-Energo JSCand its BRO for knowledge of the Code of Business Conduct.4.4.9. Procedures for monitoring of stated objectives achievementIn accordance with the Provision on the Company Board of Directors (approved bydecision of the Management Body of Holding Samruk JSC dated January 21, 2008,Minutes No.03/08), the exclusive competence of the Board of Directors is as follows:determination of priority targets of the Company’s activities and approval of strategictargets of the Company’s development for five years.Liabilities on achievement of strategic goals of the Company rest with the ManagementBody members and with the heads of the Company’s structural divisions.For monitoring of achievement of the goals set for each member of the ManagementBody and heads of division, the maps of key performance indicators (hereinafterreferred to as the KPI) are developed annually with reference to the goals set. Inthese maps, KPIs are reflected as the Company’s strategic goals, both financial andnon-financial indicators.For the purpose of efficiency of mechanisms targeted at achievement of the goals set,and conformity with the world best practices, in November 2010, KPMG internationalcompany performed diagnostics of the corporate management system. The deliverablesof that work were as follows:Report on the results of diagnostics of corporate management containingdescription of positive aspects and areas for improvement from the point of view ofthe corporate management best practices;Report with practical recommendations on elimination of discrepancies andnonconformities revealed and further improvement of the corporate managementsystem.On the basis of practical recommendations proposed by KPMG, the Company plans toform a Plan on elimination of discrepancies and nonconformities revealed and furtherimprovement of the corporate management system.The main goal of the Company corporate management system improvement is increaseof the current rating level. By 2015, the Company plans to be among the top five bestcompanies of the Fund Group in accordance with the corporate management rating.28

To carry out the goal set, next year, the Company plans to bring into harmony all theinternal normative and legal documents available in Samruk-Energo JSC with basicrequirements of the best practices of corporate management. In addition, it is plannedto develop new documents taking into consideration KPMG’s recommendations, tointroduce an annual process of accounts formation, and increase efficiency of theCompany’s business processes.4.4.10. Own efficiency evaluationFor the reporting period, activities on evaluation of their own efficiency were notconducted by the Company Board of Directors.4.4.11. Precautionary principleSamruk-Energo JSC adheres to the 15 precautionary principle set forth in theDeclaration adopted at the United Nations Conference on Environment andDevelopment in Rio de Janeiro on 3-4 June 1992.Within the framework of further protection of environment, the Government of theRepublic of Kazakhstan adopted Resolution No. 1232 dated 14 December 2007 toapprove the Technical Regulation of the “Requirements to emissions into environmentwhen burning various kinds of fuels in boiler plants of heat electric power plants” whichwill enter into force on 1 January 2013.Samruk-Energo Group of Companies realizing that in the process of its activities, itdamages the environment to some extent, it implements activities which promotereduction of emissions into environment. For the purpose of compliance with therequirements of the Technical Regulation, Samruk-Energo Group of Companies, tryingto reduce hazardous emissions into air, started prompt installation of smoke filtersallowing to significantly reduce contamination of environment.4.4.12. Participation in charters and initiativesFor the reporting period, Samruk-Energo Group of Companies did not take any liabilitiesand did not support any charters or initiatives in the sphere of economy, environmentand social sphere.4.4.13. Membership in associations and/or national and international organizationson protection of interests.Samruk-Energo JSC is a member of Kazakhstan Associationof Organizations of oil and gas and energy complexKAZENERGY.4.4.14. Relationship with parties involvedSamruk-Energo JSC considers its parties involved as a group of persons or organizationswhich have an impact on the Company’s activities or are exposed to the Companyactivities’ impact.Being one of the biggest vertically integrated electric power companies of the Republicof Kazakhstan, Samruk-Energo JSC has a great social value and, as a consequence, itinteracts with many interested parties which are shown below.29

Parties involvedTerms of ReferenceInteraction methodsShareholders Performance efficiency; General Shareholders’ Meeting;Number of employees Dividends; of Total number of employees by labor Annual agreement report; type in 2010 Transparency and disclosure of Meetings and negotiations;(permanent, provisional) EnvironmenTotinformation. Internet - website; Correspondence and requests;al workforce number by Exhibitions, forums and presentations.Branch andrelated organizations Profitability of companies; Meetings and sittings; Reduction of hazardous emissions; Internet - website; Efficient use of water resources; Procurement; Using high technologies. Non-financial reports; Working visits;IMPACTSAMRUK-ENERGO JSC BUILDS ITS ACTIVITIES BASED ON LEGISLATIVE REQUIREMENTS Roundtables, FOR summits. PREVENTION OF ANY FORMSOF HUMAN RIGHTS ABUSE.Staff IN Wages 2010 THERE and salaries; WERE NO EVENTS OF USING FORCED OR OBLIGATORY The views LABOR and IN SAMRUK-ENERGO wishes, communicated GROUP OF Social benefits;through the heads of departments; COMPANIES. Safe working conditions; Internet - website;IN 2010 THERE WAS NO EVENT Professional OF VIOLATION development. AFFECTING RIGHTS OF NATIVE AND INDIGENOUS Questionnaires PEOPLES IN and SAMRUK-ENERGO interviews; GROUPOF COMPANIES. THE COMPANY ACKNOWLEDGES THE RIGHTS AND OPPORTUNITIES EQUALITY Mass PRINCIPLE. media. EMPLOYEES HAVE THE RIGHT Meetings of the Management Body.TO FREEDOM OF ASSOCIATION UNIFICATION AND CONDUCTION OF COLLECTIVE BARGAINING WITHIN THE 9.PUBLIC RELATIONS 6. EN7.LABORMANAGEM10. PRODUCT LIABILITYENTState authorities Sector Development Programs;Social issues; Participation in government workinggroups; Tariffs. Interaction through sectororganizations; Consultations with the state bodiesauthorized in the electricity sector.MANAGEMENT6.employment type in 20105. HUMAN RIGHTSTALIN 2010 THERE WAS NO INCIDENT RELATED TO HUMAN RIGHTS ABUSE AND/OR EMPLOYEE DISCRIMINATION INSAMRUK-ENERGO GROUP OF COMPANIES.RGO JSC AND ITS BRANCH AND RELATED ORGANIZATIONS SUPPORT ABOLISHMENT OF FORCED AND CHILD LABOR. THECOMPANY HAS NO ACTIVITIES RELATED TO USAGE OF THESE TYPES OF LABOR.Total woNumber Total numberof employees by laboragreement type in 2010(permanent, provisional)TotaNumber of employees ofSamrTotal number ofemployees by labor agreementtype in 2010(permanent, provisional)7. HUMANRIGHTS30

ConsumersMeeting the growing demand forelectricity and heat energy;Quality of services provided;Energy efficiency.Questionnaires and interviews;Mass media;Internet - website;Non-financial reports.Total workforce number by employment type in 2010Banks and otherfinanceorganizationsCredit lines;Bank accounts;Collaboration on projectsimplementation.Internet - website;Correspondence and requests;Exhibitions, forums and presentations;Financial accounts.OtheraffiliatesTotal workforce number byemployment Non-discrimination; type in 2010 Respect for human rights; Internet - website. Stable employment.6. ENVIRONM7. LABORMANAGEMENT 6. Interaction through sectororganizations.10. ENVIRO7.TOTAL WORKFORCE(permanent, provisional)2010NUMHUMAN LABOR Promotion of socio -economic Internet - website;khstan type in regions 2010 MANAGEMdevelopment in the regions of the Non-financial Number RIGHTSreports; of emplTotalCompany’s activities; (South region,(permanent,North region,provisional)West region) Press releases; Effectiveness of environmentalnumber of employees by Corporate events;management; Press11. HUMAENTagreement type in 2010labor conferences. agreement type in Environmental protection.20109. N HUMAN RIGHTSTotal workforce number by employment type in 2010 Enhancement Number of the empTotal sectoralNumber of employees efficiency; of Samruk-Energo Group of Companies by KazaTotal number of number Rendering support of employees at peak loads. byemployees by labor agreement type in 2010labor agreement type inental ImpactNumber (permanent, provisional) of eTotal number of employees by labor agreementCompetitorsPublic,Includingmass media(permanent, provisional)(permanent, SAMRUK-ENERGO provisional) JSCSuppliers Long-term cooperation; Concluded contracts and BUILDS ITS Kazakhstani content;memorandums. ACTIVITIES BASED ON Reduction of emissions.LEGISLATIVEnmentalREQUIREMENTS FOR6. RIGHTS 13. HUMAN RIGHTSEnTotal12. 6.PREVENTION OF ANYSAMRUK-ENERGO JSC BUILDS ITS ACTIVITIES BASED ON LEGISLATIVE REQUIREMENTS FOR PREVENTION FORMS OF HUMAN OF ANYworkforce numbeNumber ImNumberFORMS OFofTotalHUMAN RIGHTS number ABUSE.IN 2010 THERE of employees WAS NO INCIDENT of Samruk-ENVIRONNPartners Reliability of equipment; Non-financial reports;RELATED TO HUMAN RIGHTS ABUSE AND/OR EMPLOYEE DISCRIMINATION IN Plans for development of the WorkingSAMRUK-ENERGOof employees visits;IN 2010 THERE WASGROUPbyOFlaborCOMPANIES.Company; Energo Group SAMRUK-ENERGO of Business meetings;NO INCIDENTagreement type in 2010IN 2010 SAMRUK-ENERGOTHEREComplianceWERE NOwithEVENTScontractual JSC JSC BUILDS BUILDS ITS ITS ACTIVITIES BASED RELATED TO HUMANOF USING FORCED OR OBLIGATORY Internet ON LEGISLATIVE REQUIREMENTS FORCompanies by KazakhstanMENTALLABOR - website; INRIGHTSSAMRUK-ENERGO GROUP OFobligations. ACTIVITIES BASED PREVENTION OF ANY Advertising. FORMS (permanent, OF HUMAN provisional)ABUSE.COMPANIES.ON LEGISLATIVEAND/OR EMPLOYEEregionsIN 2010 IN THERE 2010 WAS THERE NO WAS EVENT NO REQUIREMENTSOF INCIDENT VIOLATION RELATED AFFECTING TO RIGHTS HUMAN OF RIGHTS NATIVE ABUSE AND INDIGENOUS AND/OR DISCRIMINATION EMPLOYEEPEOPLESININ(South region, North region,SAMRUK-ENERGO GROUP OF COMPANIES. FOR West PREVENTION region)6. ENVIRONMENTALDISCRIMINATION THE COMPANY ACKNOWLEDGES IN SAMRUK-ENERGO THE RIGHTS GROUP AND SAMRUK-ENERGOOF OPPORTUNITIESCOMPANIES.EQUALITY PRINCIPLE. OF EMPLOYEES ANY FORMS HAVE OF THE RIGHT TO FREEDOM OF ASSOCIATION UNIFICATION GROUP AND OFIN 2010 THERE CONDUCTION WERE NO OF EVENTS COLLECTIVE HUMAN OF RIGHTS USING BARGAINING FORCED WITHIN OR OBLIGATORY THE LIMITS OF LABOR THE LEGISLATION IN SAMRUK-ENERGOCOMPANIES. IN POWER.ABUSE. 8. IMPACT I7.HUMANGROUP OF COMPANIES.IN 2010 SAMRUK-ENERGOTHERE WEREIN 2010 THERE WAS NO EVENT IN 2010 OF VIOLATION THERE AFFECTING RIGHTS OF NATIVE NO AND EVENTS INDIGENOUS OF USINGPEOPLES IN SAMRUK-ENERGO 9. PUBLIC RELATIONS LABORr by employment type inWAS GROUP NO INCIDENTJSC BUILDS ITS2010 OF COMPANIES. THE COMPANY ACKNOWLEDGES ACTIVITIES THE FORCED RIGHTS BASEDORAND OPPORTUNITIES EQUALITY RELATED PRINCIPLE. TO EMPLOYEES HAVEMANAGETHE RIGHT OBLIGATORY FREEDOM LABOR OF31ON LEGISLATIVEASSOCIATION UNIFICATION AND HUMAN CONDUCTION RIGHTS OF COLLECTIVE BARGAINING WITHIN IN SAMRUK-ENERGOREQUIREMENTS THE LIMITS FOR OFABUSE AND/ORGROUP OFNon-financial reports;Number of employees of Samruk-Energo GroTotal number of employees by labor

5. Economicefficiency32

Economic efficiencyIn 2010, Samruk-Energo Group of Companies achieved significant success:Operating consolidated profit exceeded KZT 10 billion, while in 2009, there was aloss in the amount of KZT 1.4 billion;Compared to 2009, electric power production increased by 9%, electric powertransmission – by 2%, coal mining – by 12%;KZT 558 million were channeled to sponsor and beneficent support.Samruk-Energo JSC’s Management Body and Board of Directors make significant effortsto increase the Group’s economic effectiveness. A decision of Group restructuring hasbecome one of the steps to achieve the objectives – in 2010 voluntary liquidation ofKazKuat JSC and KMG-Energo JSC was initiated; assets of the liquidated companieswere transferred into ownership of Samruk-Energo JSC.Achieving the objectives considerably depends on the workers of the Group. Samruk-Energo JSC is interested in the development of human resources. For this purpose, KZT135 million were channeled to training of the personnel in 2009. In the future, Samruk-Energo JSC is going to introduce an integrated human resource management system,which will include such elements as motivation of the personnel, a grading system anda personnel reserve program. An effective human resource management system willallow Samruk-Energo JSC to achieve still more significant successes in 2011.5.1. Indirect economic impactThe aim of Samruk-Energo JSC’s senior management and Board of Directors is creationof a sustainable company. The term “sustainable” implies an effective use of Samruk-Energo Group of Companies’ and public resources.For these purposes, integrated management systems are introduced at certainenterprises, technical re-equipment of the stations is performed and the requirementsto the personnel and suppliers are being raised. Significant attention is paid toeconomic aspects, because the projects in the sphere of corporate social responsibility,improvement of the environmental situation and growth of the Company are financedfrom the Group of Companies’ operating profit.In accordance with the above mentioned all the rest aspects of the sustainabledevelopment are analyzed by the managerial staff for the purposes of economiceffectiveness. For example, efficiency of labor (job management), used raw materials(impact on the environment) and other aspects are taken into account in the course ofthe Group of Companies’ activity planning.Philosophy of sustainable development and effectiveness is present in such aspects ascharitable activity, though such aspects are not to be considered from the point of viewof economical science. Nevertheless, a quality effect and the scope of the changes aretaken into account, when priority social projects are determined.As a result of it, the Group of Companies is finishing 2010 with a good profit indicator(more detailed information is provided in the financial statement and report of thesenior management on the results of financial and economic activity on the web-site ofSamruk-Energo JSC).5.2. Market presenceThe activity of Samruk-Energo Group of Companies is concentrated in the territory ofthe Republic of Kazakhstan. In a number of the cities located in Pavlodar and Almatyregions enterprises of the Group are city-forming. This, consequently, lays obligationson Samruk-Energo JSC as to sustainable development of the presence regions.33

First and foremost, sustainable development of the regions is ensured byimplementation of an investment program and timely payment of taxes to therepublican and regional budgets. In 2010, KZT 58 billion were channeled toimplementation of the investment program; tax deductions amounted to KZT 7.5billion.Another important factor is ensured employment of the population. Though Samruk-Energo Group of Companies has no document regulating employment of the localpopulation, almost 100% of the workers are citizens of the Republic of Kazakhstan.5.3. Ensuring performance availability and reliability of electricpower supplyFrom year to year, concern about reliability of power supply and electrical networks isgrowing. A reliable operation of power supply systems and power generation is aguarantee of sustainable development of Samruk-Energo Group of Companies and thecountry as a whole.In connection with this, a priority direction of Samruk-Energo Group of Companies istaking preventive measures aimed at exclusion of technological emergencies at itsfacilities. To maintain the equipment in a working condition, annual and advanceschedules of the planned repair works are developed, which indicate the need of theactivities performed and the volumes for uninterrupted and trouble-proof supply ofpower to consumers. Planning of technical maintenance and scheduled preventiverepairs of the equipment, buildings and structures is performed in compliance with theInstruction for Organization, Technical Maintenance and Repairs of Equipment,Buildings and Structures of Power Plants, Heating Systems and Electrical Networks /RA122.04.181-03 / dated May 30, 2003 and other regulatory documents.In case of disturbance situations, Samruk-Energo Group of Companies makes its best torestore the emergency elements of the equipment and networks within the shortestpossible period or organize uninterrupted supply of power to consumers by effectiveuse of power generating capacities.5.4. Demand and consumption level management programsA process of advanced planning of electric power industry development is regulated bythe Resolution of the Republic of Kazakhstan Government dated October 29, 2010 No.1129, On Approval of the Program for Electric Power Industry Development in theRepublic of Kazakhstan, for 2010-2014. The main objective of this Program is ensuringsustainable and balanced growth of economy through effective development of theelectric power industry. Target indicators of the Program are:Achieving power generation in 2014 as 97.9 billion kW-hr with the forecastedconsumption of 96.8 billion kW-hr.Ensuring the volume of coal mining by 2014 as 123 million tons.Increasing the use of renewable energy sources in the total power consumptionvolume up to 1% by 2014.Within the framework of the state program for electric power industry development,Samruk-Energo Group of Companies has initiated a number of the projects for increaseof the generating capacities: start of the third generating set at EGRES-2 PS JSC,construction of the Balkhash CHP-Plant and the Moynak HPP. In addition, to providewith power new Aziada-2011 facilities, which were put into operation, Samruk-EnergoGroup of Companies started four new substations with the cable lines of 110 kW –Ermensay, KazGu, Medeu and Shymbulak with the total transformer capacity of 832MVA and a substation called New No. 16 (32 MVA) for supply of power to the ITP FEA in34

Almaty city. Advanced equipment provided by the leading foreign and home producersand ensuring reliability and safety of power supply to consumers of the southern part ofAlmaty, Asiad facilities and metropolitan, was installed at these power objects.Along with the development of the electric power industry, the Government of theRepublic of Kazakhstan issued a Resolution dated June 28, 2008, No.644, according towhich The Concept of the Coal Mining Development of the Republic of Kazakhstan forthe Period up to 2020 was developed and approved. In compliance with this Concept,Bogatyr Komir LLP fulfills the action plan aimed at meeting the growing needs of theRepublic of Kazakhstan in electric power industry. Within implementation of thisprogram up to the year 2018, Bogatyr Komir LLP is going to streamline the productionby introducing an automobile-conveyor technology of mining with coal blending atBogatyr open pit mine and organizing permanent inside dump, which will make itpossible to increase production capacity of the enterprise at Bogatyr open pit mine upto 43.7 million tons a year. This will facilitate optimization of expenses and productioncosts in conditions of the permanently growing depth of mining.The advanced construction of new generating capacities and power lines, broadening ofoperating power facilities and introduction of new technologies for mining of powergenerating coal allows the work to be performed in normal operations mode andwithout overloads.5.5. Scientific research-and-development activities aimed atprovision of reliable electric power supplyInvestigation and research for Samruk-Energo Group of Companies play an importantrole in maintaining strategic goals of the Group for increase of power and heatgeneration with low specific indicators of CO2 discharges.At the same time, Samruk-Energo JSC is not a company carrying out research activity; itis rather positioned as a rational user of technologies, which are mainly developed byother foreign or local companies. In the medium term, Samruk-Energo JSC seeks toincrease effectiveness of its energy economy and carry out research in the sphere ofthe rational production of heat and electric power.In 2010, the total expenditures for investigation and research by Samruk-Energo Groupof Companies amounted to 396 900 KZT108.Economic values of distributed and retained profitsGenerated direct economic valueIncome2010 2009Unit ofmeasureNet sales 76 910 376 64 454 276 ths. KZTReturn from assets sale 380 570 24 046 ths. KZTDistributed economic valueOperating costsMoney payments to counterpartieswithoutdoorsSalaries and other payments and benefits toemployeesFull money payments to employees (currentpayments net of future obligations)Payments to suppliers of capital41 091 850 28 332 369 ths. KZT17 147 612 15 061 769 ths. KZTInterest payable to creditors 5 737 717 6 155 635 ths. KZT35

Payments to the stateTax payments including penalties and fines 7 559 063 4 300 925 ths. KZTInvestments in communitiesVoluntary deposits and money investments incommunitiesRetained economic value324 707 168 888 ths. KZTInvestments, release of capital, etc. 10 862 599 (1 429 656) ths. KZT5.6. Pension obligationsObligations of Samruk-Energo Group of Companies on pension deductions of employeesare discharged in strict conformity with the Republic of Kazakhstan Law, “On PensionBenefits in the Republic of Kazakhstan” dated June 20, 1997. The Law came into forceon January 1, 1998. In conformity with this Law, all employees of Samruk-Energo Groupof Companies must, in a compulsory manner, deduct 10% of their income to individualpension accounts of the pension saving fund.5.7. Significant financial assistance received from stategovernment bodiesIn 2009, 42 459 mln. KZT were appropriated to Samruk-Energo JSC from the RepublicanBudget. Due to untimely registration of the additional share issue, it was decided thatthe above mentioned amount would be obtained as financial support.In 2010, an additional amount of 32 347 mln. KZT was obtained. After completion ofthe corporate procedures and share placing the whole amount of financial support wasrepaid.5.8. Standard entry-level employee wage and fixed minimum wageratio in the Republic of KazakhstanOfficial salaries to the employees of Samruk-Energo Group of Companies areestablished in accordance with the approved staff schedule depending on employee’squalification and complexity of the work performed.Labor remuneration system of Samruk-Energo Group of Companies is based on thefollowing main principles:Motivation of employees for achieving the Company’s goals by raising effectivenessof an individual activity, activity of the organization department and for achievingstrategic goals of the organization;Competitive ability of the employment benefits in the labor market with regionaland business specific features being taken into account;Transparency — ensuring understanding by all employees of the principles offorming the structure and level of incentive payment in maintainingconfidentiality;Conformity of the labor remuneration system with the legislation in force.Samruk-Energo JSC, its branches and related organizations annually perform monitoringof the labor market in the presence regions and adjust the amount of the employees’salaries based on the obtained data. In 2010, the amount of an average salary of aninitial level specialist of Samruk-Energo JSC was 46 386 KZT, which is 14% more than asimilar indicator of the previous year. In 2010, according to the Law of the Republic of36

Kazakhstan, “On the Republican Budget of the Republic of Kazakhstan”, the amount ofa minimum salary was 14 952 KZT.5.9. Local population hiring proceduresIn connection with lack of the uniform personnel policy, in 2010 the personnelemployment procedure of Samruk-Energo Group of Companies was varying. In 2011,Samruk-Energo JSC is aiming at creation of the uniform personnel recruitment andappointment system. This system will be targeted at creation of an effectiveorganizational structure of Samruk-Energo JSC, its branch and related organizations.Besides, the personnel recruitment and appointment system will help to effectivelyfollow strategic goals, plan the needs in human resources and make timely selection ofspecialists having the required knowledge, skills, business and personality qualities. Inaddition, Samruk-Energo JSC is going to introduce open competitive selection principlesto attract the most prepared and talented specialists. Transparency of the competitionprocedures, professionalism and competence of candidates will be the main principlesof the competitive selection.5.10. Infrastructure investmentsTo develop local communities and form the image of a socially responsible company,Samruk-Energo JSC implements social projects in the presence regions of its branchesand related organizations.The total amount of expenses channeled by Samruk-Energo Group of Companies toimplementation of the social projects amounted to 324707 ths. KZT. In 2010, the mainspheres of the social activities carried out by Samruk-Energo Group of Companies were:provision of urban amenities by planting of greenery;financing of the social sphere jointly with the Akimiat (council) of the PavlodarRegion;rendering material aid to the losers by dam failure in Kyzyl-Agash village;rendering technical aid to medical institutions;strengthening material and technical base of schools and orphanages5.11. Indirect economic impactIn addition to production activities, Samruk-Energo JSC carries out significant socialwork aimed at support and development of cultural and humanitarian spheres of thesociety, including rendering of support to vulnerable sections of the population (aid toorphanages, sports societies and disabled children). In 2010, 558 mln. KZT wereprovided as sponsor and charity support.For example, employees of Samruk-Energo JSC, its branches and related organizationsprovided voluntary aid in the amount of 13.5 mln. KZT to the population of Kyzyl-Agashvillage, who have incurred losses caused by the flood.Almaty Electric Power Stations JSC has repaired the children’s division of the ScientificResearch Institute of Oncology and Radiology, substituted windows, the heating andventilation systems for the new ones.AlmatyEnergoSbyt LLP (hereinafter - AES) has conducted an event named “Ardager –we remember and honor”, devoted to the 65 th anniversary of the Victory. Within theframework of the event, in the responsibility zone of AES (Almaty and 8 districts ofAlmaty Region), each veteran was given 50 kW of electric power free of charge fromMay 1, 2010 on a monthly basis.37

Bogatyr Komir LLP provided financial support to the Sportsmen Supporting Fund andchanneled significant resources to children’s pre-school organizations, educationalinstitutions, health institutions, objects of culture and sports, populated areas andhosing and utilities objects of Pavlodar province.Special attention is paid to children: they are given passes to rest homes, sanatoria,children’s camps, invited to children’s New Year parties, are given presents. Exhibitionsof children’s craft works and pictures are organized.5.12. Planned capacity compared to the forecasted electric powerdemand in long-term prospectSamruk-Energo Group of Companies does not bear direct responsibility for a long-termplanning of electric power processes for electric power systems, in which it carries outits activities.A system operator, Kazakh Company for Electric Networks Management JSC carries outthe necessary research to forecast long-term needs of the system. Samruk-EnergoGroup of Companies is acting as a market agent coordinating the investment decisionsand the appropriate business plans according to the forecasted data of the systemoperator.Average electric power generation efficiency2010 2009Unit ofmeasureGRES 30,2 29,8 %TPP 53,1 52,6 %Electric power transmission loss in 2010Percentage ratio of total generatedelectric power volumeUnit ofMeasureHPP 0,56 %GRES 0,31 %TPP 0,27 %Alatau JarykKompaniyasy JSC18,86 %MangistauElectronetworkDistribution CompanyJSC8,40 %38

6. EnvironmentalImpact39

Environmental ImpactBeing one of the major electric power companies in Kazakhstan, Samruk-Energo JSCrealizes its significant role for the society in sustainable development processes.Environment protection, as well as rational resources exploitation play a key role inactivities of the Company and its branch and related organizations.Responsibility for environmental issues is imposed on First Deputy Management BodyChairman.Currently, Company’s preferred development directions and objectives of activities inenvironment-oriented field that will be reflected in the Company’s long-termDevelopment Strategy and Environmental Policy are being determined.The Company plans to achieve consequently mitigation of environmental impact causedby production activity through adoption of new technologies using renewable energysources.Summary in regard to the management approach by each aspect in the field ofenvironment is provided below.6.1. Materials usedWhen carrying out its activities, Samruk-Energo Group of Companies acquires naturalresources used for further transformation into electric or heat energy. Besides,together with natural resources Samruk-Energo Group of Companies uses chemicalproducts, lubricating oils and cooling liquids minor by size of consumption.In particular, to the present day some branch and related organizations of Samruk-Energo Group of Companies use equipment composed of polychlorinated biphenyls(hereinafter – PCBs). PCBs are used as dielectric liquids in transformers, condensers andother electric equipment, thus constituting a threat for human health. In order toprevent PCB toxication risk, the Republic of Kazakhstan has signed the “StockholmConvention on Persistent Organic Pollutants”. According to this document the Republicof Kazakhstan, having become the Convention party, should implement the followingmeasures:Forbid POP-containing materials export, import, production in the Republic ofKazakhstan;Cease utilization of equipment containing PCBs (i.e. transformers, condensers orother PCB-containing equipment) by 2025;Take measures on POPs accidental release reduction;Take measures for development of corresponding strategies on revelation of POPpollutedareas;Inform the society about the risk of POPs impact on human health andenvironment.The result of above mentioned measures performance under the Convention will beenvironmental improvement in the Republic of Kazakhstan.Moreover, in order to minimize the impact of materials used, Samruk-Energo Group ofCompanies plans to use renewable energy sources to a far greater degree in future,particularly, sun and wind power that will enable to reduce considerably hazardousenvironmental emissions, discharges and wastes.40

6.2. PowerSamruk-Energo Group of Companies exerts efforts contributing to enhancement ofenergy efficiency. Priority activities in this issue are upgrading of outdated equipment,enhancement of efficiency in electric and heat energy production, electric energytransportation and distribution.6.3. WaterSamruk-Energo Group of Companies utilizes water resources for chilling of recyclingwater supply circulating systems and secondary technology processes on heat powerplants primarily. Insignificant loss of water involved in a technology process due toevaporation is observed thereat. The main bulk of water after evaporation intechnology processes and conduction of mechanical, physicochemical and biologicalpurification is returned to natural environment.Local authorized agencies on water resources and environment regulate issuesregarding water intake; particularly, special attention is paid to water-level inecosystems of branch and related organizations’ regions of presence. Reduction ofvolume of water loss used in a technology process is a preferred direction in themedium term.6.4. BiodiversitySamruk-Energo Group of Companies strives to minimize impact of its activities on plantand animal life. Special attention is paid to regions, where electric power assets ofSamruk-Energo Group of Companies are located in the areas of State National NatureParks or Wildlife Refuges.Samruk-Energo Group of Companies has not worked out regulatory documents in thefield of biodiversity management as of now. Notwithstanding absence of biodiversitymanagement documents, each Company of Samruk-Energo Group realizes theimportance of lean industrial processes application and adoption of new technologiesimproving safety of animal and plant life. Taking into account increasing role ofsustainable development aspects both in the world and in Kazakhstan, Samruk-EnergoGroup of Companies plans to improve biodiversity control and management in regionsof presence and operations.6.5. EmissionsThe main considerable greenhouse gas discharged into the atmosphere due to activitiesof Samruk-Energo Group of Companies is the carbon dioxide (CO2) that is formed uponproduction of heat and electric energy, as well as coal mining. Definitely, expansion ofthe production level of Samruk-Energo Group of Companies implies increase ofatmospheric greenhouse gas emissions.In order to minimize environmental pollution Samruk-Energo Group of Companiescarries on systematic works on upgrading of the technology process. Equipmentenabling hold of a considerable part of atmospheric particulate emissions is installed atthe present time (at Ekibastuz GRES-2 Power Station JSC – electrofilters with ashcollection coefficient 99,6% and Almaty Electric Stations JSC – second generationemulsifiers).41

6.6. DischargesEnvironmental safety and rational exploitation of natural resources, including waterresources, hold a prominent place in activities of Samruk-Energo Group of Companies.Reduction of water intake and discharge volumes required for normal functioning of anelectric power plant is the top priority in order to reduce step-by-step discharges in theecosystem of the Republic of Kazakhstan.Discharges from generating stations are analyzed with respect to excess of maximumallowable norms of pollution elements in waste water before they are discharged inwater sources of the Republic of Kazakhstan. In consequence of made analyses allemissions made by Samruk-Energo Group of Companies comply with requirements ofthe Environmental Legislation of the Republic of Kazakhstan.6.7. WasteThe most typical waste from production activity of Samruk-Energo Group of Companiesare as follows: ash, coal combustion slags, transformer oils, used ultraviolet lamps andaccumulator batteries. Currently Samruk-Energo Group of Companies has no commonwaste management approach.6.8. Products and servicesMain products and services of Samruk-Energo Group of Companies are electric and heatenergy production, electric energy distribution and transportation, coal mining,reconstruction and upgrading of electric power complex facilities. The key objective ismaintenance of achieved level of provided services and products, as well as furtherquality and parameters improvement using West standards with regard to products andservices in the field of electric power industry and coal sector.42

As a result, Samruk-Energo Group of Companies complies with all requirementsregarding quality and parameters of provided products and services on the territory ofthe Republic of Kazakhstan.6.9. Compliance with requirementsSamruk-Energo JSC’s administration pays careful attention to issues of compliance withthe environmental legislation.One of high priority measures on enforcement is conduction of environmental audit. Inthe medium term Samruk-Energo Group of Companies plans to implement the certifiedenvironmental management system in order to minimize negative environmentalimpact, improve environmental and economic activity efficiency, as well as to reducewaste.6.10. TransportThe preferred direction for Samruk-Energo Group of Companies is minimization ofgreenhouse gas emissions generated as a result of branch and related organizations’activity. Greenhouse gas emissions caused by usage of motor transport fortransportation of employees or fuel are insignificant in comparison with emissions gotfrom electric of heat energy generation. In most cases there are no processes leadingto emissions of harmful materials into the atmosphere and discharge in water bodiesupon electric energy transportation.Materials usedRaw materialsVolumeUnit ofmeasureCoal 6 129 636 tonTimber 0 tonOil-fuel 61 644 tonGas 804 365 ths. m³Water 12 129 870 114 tonMaterials related to the industrial process 9 320 tonDirect energy consumption2010 2009Unit ofmeasureCoal 131 501 282 129 973 279 GJNatural gas 24 258 692 22 835 252 GJOil-fuel 2 736 942 1 220 547 GJGasoline 16 894 18 902 GJDiesel fuel 8 780 7 713 GJCondensed gas 875 1 333 GJExpansion of basic materials consumption in 2010 in comparison with 2009 was causedby increase of electric energy production level in the reporting period.Aggregate saved energy of Samruk-Energo Group of Companies in 2010QuantityUnit ofmeasure43

Through:Industrial process upgrading 17 618 GJEquipment revamping or replacement 1 665 341 GJChange in the staff behavior 24 155 GJEnergy saving of Samruk-Energo Group of Companies results from optimization ofsecondary electric power equipment operation, replacement of old equipment withmore energy-efficient one, as well as prudent attitude of the Group employees toelectric energy usage.Total water withdrawal by sources in 2010Total water withdrawalVolumeUnit ofmeasurefrom surface water bodies 19 755 302 ths. m³from underground sources 4 402 ths. m³from waster water of other organizations 388 ths. m³form municipal and other water supply systems 93 422 ths. m³Percentage and total volume of recycled and reused waterVolumeUnit ofmeasureTotal water withdrawal 19 853 514 ths. m³Volume of recycled and reused water 843 804 ths. m³Percentage of recycled and reused water 4,3 %6.11. Organizations’ territories of high biodiversity valueFacilities of Samruk-Energo Group of Companies that are taken into consideration underthis indicator are generally electric power transmission lines, heat and hydro powerplants, as well as coal strip mine.Among Samruk-Energo Group of Companies, Almaty Electric Stations JSC only hasproductive assets that include HPP 1, HPP 2 and HPP 3 located on the territory of theIli-Alatau state national nature park 48,8 ha in area. This park is included in the list ofspecially protected natural areas of the Republic of Kazakhstan.Emissions of NO, SO and other significant pollutants into the atmosphereValueUnit ofmeasureNOₓ 25 731 tonSOₓ 64 960 tonPersistent organic pollutants 5,7 tonVolatile organic compounds 57,3 tonHazardous air pollutants 56 125 tonEmissions from point and fugitive sources 1 045 ton44

Particulate pollutants 28 940 tonOther standard atmospheric emission categories used inregulatory acts4 810 tonTotal waste water discharge volume by Samruk-Energo Group of CompaniesVolumeUnit ofmeasureReceiving facilityRivers 110 946 181 m³Lakes 124 021 m³Artificial objects 2 439 613 m³Total 113 509 815 m³Total waste water discharge volume by Samruk-Energo Group of Companies by the purificationmethodVolumeUnit ofmeasurePurification methods 2 567 274 m³Physicochemical method 46 355 m³Mechanical method 472 094 m³Biological method 688 776 m³Without purification 1 360 049 m³Partially clean water 110 942 541 m³Total: 113 509 815 m³In case of insignificant pollution of intaken water not leading to excess of maximumallowable discharge norms, Samruk-Energo Group of Companies does not carry outwaster water purification.This type of waster water is referred to as partially clean waster water not leading toviolation of water norms and quality in a controlled section line or a water consumptionpoint.6.12. Penalties for non-compliance with the environmentallegislation and regulatory requirementsIn 2010 there were no events related to penalties imposed for non-compliance with theenvironmental legislation of the Republic of Kazakhstan in the course of Samruk-EnergoGroup of Companies operation.The only considerable penalty over Samruk-Energo Group of Companies was fixed in2009 for non-compliance with the requirement of article 217 of the Environmental Codeof the Republic of Kazakhstan in the amount of 1 127 000 KZT.45

7. LaborManagement46

Labor ManagementPrimary objectives of Samruk-Energo Group of Companies are performance levelincrease, worthful remuneration and provision of occupational safety. These objectivesdemonstrate adherence to principles of social responsibility to shareholders, employeesand local communities.The Code of Business Conduct based on adherence to ethical norms is worked out inSamruk-Energo Group of Companies. Besides, collective agreements that determineobjectives regarding interaction between the Company and parties involved based onadherence to legislative requirements and norms of the Republic of Kazakhstan areconcluded in branch and related organizations. These documents are posted oninternet-sites of Samruk-Energo Group of Companies by open access. Moreover, in 2011the Company’s administration is going to work out the Staff Policy that will determinekey directions of and approaches to human resources management.Labor management is the responsibility of the Human Resources ManagementDepartment that is directly subordinate to Samruk-Energo JSC’s Management BodyChairman. In order to prevent professional risks the Executive Management or speciallycreated company subdivisions are responsible for coordination of branch and relatedorganizations’ labor management.7.1. EmploymentNotwithstanding that in 2010 1622 employees left Samruk-Energo Group of Companies,the number is staff increased for 2%. This indicator confirms attractiveness of thecompany as an employer. Additionally, employees are paid one-time remuneration onretirement; financial assistance is rendered too relative to death of pensioners whohave worked in the holding. For the purpose of social support of energy veterans,pensioners, internationalist soldiers, the Great Patriotic War and labor front veterans,the Company has rendered financial assistance to the holidays of “May 9 th ”, “March 8 th ”and the professional holiday “The Power Engineers' Day”.Total workforce number by employment type in201047

Number of employees of Samruk-Energo Groupof Companies by Kazakhstan regionsSouth regionNorth regionWest regionTotal number of employees by labor agreementtype in 2010PermanentProvisional7.2. Employee-administration relationshipSamruk-Energo JSC understands that coherent company collective is the basis ofsuccess. Herewith, staff care is not limited to advertence to full-time employees only.Employees combining work with higher education are provided additional leaves for aperiod of end-of-semester exams or preparatory terms, preparation and defence ofgraduation work (paper), final examinations.The Company promulgates and promotes healthy life style of employees and theirfamily members widely. Together with trade unions of Samruk-Energo Group ofCompanies, public sport competitions and employees’ active rest activities are heldannually.48

7.3. Occupational health and safetyPrincipal directions of the Company’s activity in the field of health and safety arecreation of safe labor conditions, improvement of employees’ labor sanitaryconvienences, decrease of injury rate and effect of hazardous, as well as harmful andhazard factors according to the legislation of the Republic of Kazakhstan.In order to increase awareness of diseases and safety regulations at the place of laboractivities, Samruk-Energo Group of Companies has carried out examination programs inorder to check knowledge of Accident Prevention Regulations, Equipment OperatingProcedure Regulations, Preventive Fire-Fighting Regulations and Instructions for First-Aid Treatment in Case of Accidents.All employees involved in harmful and other unfavourable conditions are providedallowances stipulated by the labor legislation of the Republic of Kazakhstan (foodproducts, workwear, personal protective equipment, ablution premises and facilities,etc.). Additionally, employees, whose activities are associated with harmful laborconditions, receive compensations established by norms (shortened working hours,increased salary amount and additional paid annual labor leave). All employees of theCompany and branch and related organizations have been insured against accidents andhave attended obligatory medical examination.7.4. Training and educationElectric power industry specificity requires regular continuous staff training andretraining for admission to work and to maintain a high level of expertise. Samruk-Energo Group of Companies strives to develop and train employees regular. Stafftraining and development are key success factors for provision of economical, failurefreeand effective operation of equipment and the company generally.7.5. Diversity and equal opportunitiesThe foundation of Samruk-Energo JSC’s Staff Policy is provision of equal opportunitiesto all employees in order to unlock their potential. Corporate ladder advancement ismade subsequent to results of employees’ fair professional abilities, knowledge andskills appraisal only.Currently the Company has no integrated procedures preventing any types ofdiscrimination by race, gender, language, religion, national origin, social status, nativestatus, marital status, sexual orientation or other types of discrimination related towork performance quality requirements.7.6. Preparation and awarenessAll Companies of the Group have integrated procedures regarding awareness of labormanagement issues. All employees complete training in the field of labor protectionaccording to item 4 article 313 of the “RK Labor Code” and based on item 21 of“Regulations for provision of trainings, instructions and examination of employees’knowledge on safety and labor protection issues” dated August 23, 2007 №205-п.According to the national decent work program for 2010-2012 worked out in theRepublic of Kazakhstan aimed at fully legitimate participation in world economythrough adoption of international standards, the Company intends to implement theintegrated management system ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2008.As of December 31, 2010:49

EGRES-2 PS JSC has got implemented and functioning IMS. The Certificate is issuedby Russian Register certification association.Bogatyr Komir LLP has got implemented and functioning quality managementsystem (the Certificate is issued by Moody International certification association)and the environmental management system (the Certificate is issued by thePromyshlennyi Service certification association), the Implementation Plan for themanagement system in the field of professional health and labor safety(negotiations are held with consultants).AlmatyEnergoSbyt LLP has got implemented and functioning quality managementsystem. The Certificate is issued by Tuv Nord Cert certification association.Aktobe TPP JSC has realized preparation of the IMS documentation; certification isplanned in the 1 st quarter 2011.AZhK JSC and AlES JSC have approved the IMS implementation plan; approximateproject start-up will be in October 2011.Employee turnover by age group, gender and region2010Total number of employees who have left the organization 1 622By genderMen 1 240Women 382By ageunder 30 years old 52930-50 years old 71150 plus 382By regionSouth 1 050North 444West 12850

7.7. Benefits and allowances provided to employees working underfull-time employment termsOne of main tools for provision of decent living standards of Samruk-Energo JSC’s and itsbranch and related organizations’ employees is the welfare payments and allowancessystem. All full-time employees are provided:Insurance of employees against accidents in the course of performing theiremployment (official) duties;Annual employee medical examination;Sick pay;Child-care leave (up to 3 years).Employees covered by the collective agreement2010 2009Total number of employees 18 044 17 674Number of employees covered by thecollective agreement17 123 17 628Percentage of employees covered by thecollective agreement94,90% 99,74%The majority of Companies comprising Samruk-Energo Group have the collectiveagreement in power intended to provision of employees’ effective work, socialeconomic and legal safeguards.7.8. Minimum notice period(s) regarding significant changes in theorganization’s activitiesAccording to item 2 article 48 of the “RK Labor Code”, the administration of Samruk-Energo JSC and its branch and related organizations notify an employee and/or his/herrepresentatives in writing about change of labor conditions at least one month prior tosuch changes. This item determined in the collective agreement is observed strictly byeach organization of Samruk-Energo Group of Companies.7.9. Joint health and safety committeesIn 2010 Samruk-Energo Group of Companies had no the joint health and safetycommittees formation practice, except for Bogatyr Komir LLP.Bogatyr Komir LLP has implemented Regulations “For the integrated system of laborprotection preventive measures in structural units of the Partnership” within theframework of the integrated labor protection management system. According to theseProvisions, the hazard identification system functions in the enterprise. In order tosupport effective functioning of the hazard identification system, all categories of theCompany employees (that makes over 75% of the total staff number) are involved. Thestanding accident prevention commission is the organizational and coordinating body inprovision of occupational safety.51

Industrial injuries level, occupational diseases level, lost days ratio and employee absentee ratio, aswell as the total number of work-related fatal casesWest regionNorth regionSouth region2010 2009Total number of worked hours 2 542 296 2 490 712Total number of traumas 2 1Accident frequency ratio (AFR) 0,02% 0,01%Total number of occupational diseases events 0 0Occupational disease ratio (ODR) 0% 0%Total number of lost days 245 103Lost day ratio (LDR) 1,93% 0,83%Total number of missed days 0 0Employee absentee ratio (AR) 0% 0%Number of fatal events 0 1Total number of worked hours 14 881 345 13 834 117Total number of traumas 12 15Accident frequency ratio (AFR) 0,02% 0,02%Total number of occupational diseases events 1 0Occupational disease ratio (ODR) 0,001% 0%Total number of lost days 464 1 012Lost day ratio (LDR) 0,62% 1,46%Total number of missed days 691 1 438Employee absentee ratio (AR) 0,93% 2,08%Number of fatal events 0 1Total number of worked hours 14 488 969 14 424 568Total number of traumas 5 6Accident frequency ratio (AFR) 0,01% 0,01%Total number of occupational diseases events 0 0Occupational disease ratio (ODR) 0% 0%Total number of lost days 288 235Lost day ratio (LDR) 0,39% 0,33%Total number of missed days 0 0Employee absentee ratio (AR) 0% 0%Number of fatal events 3 252

7.10. Risk prevention and control programs regarding devastatingdiseasesAccording to the Order of the Health Minister of the Republic of Kazakhstan datedNovember 16, 2009 № 709 “On approval of the List of harmful production factors,occupations, whereby obligatory medical examinations are carried out; ObligatoryMedical Examination Conduction Regulations”, employees of Samruk-Energo Group ofCompanies attend preliminary and standard medical examinations. Medicalexaminations are conducted by health care institutions that have licenses in order tocarry out medical activities on evaluation of physical occupational fitness. Subsequentto results of preliminary and standard medical examinations, the commissionrecommends the set of actions intended to employees’ health promotion; particularly,to receive hospital examination and treatment, rehabilitation treatment, provision ofhealth resort treatment and their reference to a sanatorium-preventorium.Samruk-Energo Group of Companies carries out immunization for its employees on aregular basis, as well as applies other forms of medicines for immunity support in orderto prevent diseases.Number of employees working in environments with significant availability orhigh risk of diseases, such as diminished hearing, coronary heart disease andhypertensionNumberAlES JSC 2 309Aktobe TPP JSC 297Bogatyr Komir LLP ТОО 179Ekibastuz GRES-2 Power Station JSC 1 146ZhGRES named after T.I. Baturov JSC 270Shardarinskaya HPP JSC 135MEDC JSC 2753

Average number of training hours per employee annually2010 2009Total number of training hoursExecutive management 1 598 1 010Middle management 18 341 13 057АУП specialists 13 394 9 231Production staff 185 673 168 518Service staff 35 948 37 725Average number of training hours per employeeExecutive management 36 13Middle management 20 16АУП specialists 26 18Production staff 35 32Service staff 38 397.11. Skill development programs destined to support employees'employabilityStaff training and development system is based on internal documents worked outaccording to requirements of regulatory legal acts of the Republic of Kazakhstan.Under implementation of the staff training and development system Training Centershave been established in several Companies of Samruk-Energo Group in order to realizea comprehensive approach to qualitative planning, implementation and continuousmonitoring of training projects implemented in Companies of Samruk-Energo Group.For example, AlES JSC has the Training Center that coordinates the staff trainingactivity, as well as arranges staff training, retraining and professional developmentcourses by basic energy occupations. In 2010 512 employees (330 workers, 182 chiefsand specialists) completed training directly in the Training Center of AlES JSC.AZhK JSC has 6 training practice bases. In 2010 a significant work on improvement ofthe staff professional skill; promulgation and dissemination of advanced repairoperationwork performance methods and techniques; implementation of hightechnologies, new devices and facilities applied in maintenance of electric substationand electrical distribution system equipment was carried out.Total 3 004 employees completed professional training and development in 2010, amongthem:professional training and professional development – 953 employees (426 workers,527 chiefs and specialists);professional development – 1968 employees (1736 workers, 232 chiefs andspecialists);83 employees receive distance education in Almaty University of Power Engineeringand Telecommunication and Almaty State College of Power Engineering andElectronic Technologies.Bogatyr Komir LLP has established its training-course center equipped with computers,automatic knowledge test sets that contribute to safety and labor protection training of54

the staff, as well as its knowledge examination. The training-course center has thefollowing equipped rooms: mining-transportation equipment and machinery, railwaytransport, hoisting machinery, bench and electrical installation work, labor protection.Main tasks of the training-course center are entry-level staff training and employees’professional development.Employee efficiency evaluationPercentage of employees who have received official efficiencyevaluation20107%In past 2010, 7% of employees of Samruk-Energo Group of Companies received officialefficiency evaluation. Conduction of staff performance evaluation remains the urgentproblem for Samruk-Energo Group of Companies. Nevertheless, the Group Companies’Administration strives to implement the staff motivation and remuneration system that,in its turn, will include regular employees’ performance evaluation. This system willhelp employees to be aimed at achievement of strategic objectives of the Group ofCompanies generally.Staff of Samruk-Energo Group of CompaniesNumberPercentageBy genderMen 13 156 73%Women 4 888 27%By nationalityThe Kazakhs 7 823 43,36%The Russians 7 339 40,67%The Ukrainians 1 041 5,77%The Uigurs 398 2,21%The Tatars 391 2,17%The Germans 324 1,80%The Belorussians 179 0,99%The Koreans 83 0,46%Others* 466 2,57%By ageUnder 30 years old 3 759 20,83%30-50 years old 8 951 49,61%50 plus 5 334 29,56%* - As of December 31, 2010 total 56 different nationalities worked in the Group ofCompanies. The “Others” value means: the Azerbaijani, the Poles, the Bashkirs, theUzbeks, the Kurds, the Moldavians, the Mordovans, the Dungans, the Greeks, theBulgarians, the Chechens, the Turks, the Chuvashes, the Balkarians, the Kirghiz, the55

Udmurts, the Lithuanians, the Georgians, the Lezgins, the Tajiks, the Buryats, theHebrews, the Ingushs and other nationalities.Governing bodies of Samruk-Energo Group of CompaniesNumberPercentageBy genderMen 67 85%Women 12 15%By nationalityThe Kazakhs 59 74,7%The Russians 14 17,7%The Tatars 3 3,8%The Ukrainians 2 2,5%The Koreans 1 1,3%By ageUnder 30 years old 5 6,3%30-50 years old 43 54,4%50 plus 31 39,2%Ratio of basic men and women salaries by employees’ categoryStaff categoryBasic menrateBasic womenrate*Unit ofmeasureExecutive management 403 307 тыс. тенге 131%Middle management 183 181 тыс. тенге 101%АУП specialists 112 106 тыс. тенге 106%Production staff 65 54 тыс. тенге 120%Service staff 43 46 тыс. тенге 94%RatioSamruk-Energo JSC adheres to principles of equality, justice, remuneration and nondiscrimination.Within each of organization of Samruk-Energo Group of Companies thesalary level is determined on the ground of an employee’s position and length ofservice. Herewith, an employee’s gender does not determine official salary amount.Substantial difference in the salary level between men and women for the executivemanagement and the production staff is subject to salary difference betweenorganizations of Samruk-Energo Group of Companies.*- Basic rate of women from the executive management is taken from information ofthe following companies: ZhGRES, AlES, АЭС, AZhK, ЦАУ and MEDC.56

Percentage of employees at the age enabling retirementWest regionАУПspecialistsProductionstaffSupportstaffwithin the following 5 years 0,78 7,17 2,02within the following 10 years 2,1 7,79 5,30North regionwithin the following 5 years 1,64 7,75 0,84within the following 10 years 3,05 16,31 1,86South regionwithin the following 5 years 1,16 9,30 1,56within the following 10 years 2,25 20,45 3,097.12. The policy and requirements in regard to health care andsafetyUpon selection of contracting and subcontracting organizations each Company ofSamruk-Energo Group follows its internal documents, as well as documents in the fieldof safety adopted according to the legislation of the Republic of Kazakhstan. Examplesof such documents are as follows: “Accident prevention regulations upon operation ofheat-mechanical equipment of electric power plants and heat networks of the Republicof Kazakhstan” and “Accident prevention regulations upon operation of electricinstallations of the Republic of Kazakhstan”.Examples of requirements of Samruk-Energo Group of Companies upon selection andadmission of contracting and subcontracting organizations are as follows:Availability of own contractor and subcontractor base;Job specifications and work experience;Availability of certified transportation vehicles (truck cranes, hydraulic rams, TVaerials) and drivers;Availability of a licence or a certificate;The list of persons in charge of safe work performance;Availability of a qualification certificate with a note of:passing knowledge examination by OI, APR and PFFR;passing knowledge examination by regulations of the State Mining and TechnicalInspection;passing knowledge examination by special rules;attending a medical examination.Availability of the LP, AP and EP policy;Fulfillment of the LP, AP and EP policy and monitoring conduction;References of other organizations with opinions about a contractor or asubcontractor (about experience, staff, about the completed work quality);57

Permit for supplied equipment to be applied in the Republic of Kazakhstan.7.13. Percentage of contractor's and subcontractor's employeeswho have completed corresponding labor protection and accidentprevention trainingEmployees of contracting and subcontracting organizations should obligatory receiveintroductory briefing provided by the labor protection and safety department of acorresponding Company of Samruk-Energo Group before they are admitted to aworkplace. In case a contractor’s staff has not received introductory briefing, it is notadmitted to the enterprise activities. In such a way, all employees of contracting andsubcontracting organizations rendering services to Samruk-Energo Group of Companiesshould complete corresponding labor protection and accident prevention training.58

8. Human Rights59

Human RightsObservance of human rights is one of key human resources management principles thatis based on requirements of the Kazakhstan legislation in power and application of theCode of Business Conduct. In this connection, Samruk-Energo Group of Companies worksout policies and procedures taking into account rights of employees, clients andbusiness partners. Human rights are taken into consideration in main basic regulatorydocuments. Examples of such documents are the Code of Business Conduct, the InternalCode of Conduct, the Procedure for Granting Employee Leaves and Regulations forEmployee Business Trips. Additionally, Collective Agreements that establish provision ofsocial protection, allowances and compensations are concluded with the considerablepart of employees of Samruk-Energo Group of Companies. Labor Agreement conclusionhas been preceded by election of a unified employees’ delegate body. In the course ofagreement framing all parties involved, including representatives of trade unionorganizations acting in the Group, have taken part in discussion.Besides, the Company respects religious convictions and political preferences of itsemployees, provided that they do not conflict with active legal basis of the Republic ofKazakhstan. Besides, the Company does not hinder participation of its employees inpolitical, religious and social activity as private individuals and out of hours. Over thecourse of 2010 Samruk-Energo Group of Companies fulfilled strictly requirementsprohibiting usage of labor by individuals aged up to 18 years in places with harmful and(or) hazardous labor conditions, as well as avoided whatsoever discrimination in regardto employees and business partners.The fact that Samruk-Energo Group of Companies does not have normative documentsregulating conduction of suppliers and contractors appraisal, on observance of humanrights does not hinder liable business dealing. Nevertheless, Samruk-Energo JSC plans toimplement the Ombudsman’s function, who, in his turn, will be responsible for practiceconduction and monitoring in point of inquiries and claims regarding observance ofhuman rights of employees, legal parties and any parties involved of the Group ofCompanies. All inquiries and claims will be considered by the Company’s Ombudsmanobligatory.Samruk-Energo JSC builds its activities based on legislative requirements forprevention of any forms of human rights abuse.In 2010 there was no incident related to human rights abuse and/or employeediscrimination in Samruk-Energo Group of Companies.In 2010 there were no events of using forced or obligatory labor in Samruk-Energo Group of Companies.In 2010 there was no event of violation affecting rights of native andindigenous peoples in Samruk-Energo Group of Companies. The Companyacknowledges the rights and opportunities equality principle. Employees havethe right to freedom of association unification and conduction of collectivebargaining within the limits of the legislation in power.Samruk-Energo JSC and its branch and related organizations supportabolishment of forced and child labor. The Company has no activities related tousage of these types of labor.60

9. Public Relations61

Public RelationsIn order to interact with the society and comply with corporate social responsibilityprinciples, Samruk-Energo Group of Companies has determined priority directions torealize sponsor charity support. Samruk-Energo JSC is going to fix this process in theDevelopment Strategy and the Corporate Social Responsibility Strategy. Assistancerendering criteria include creation of new opportunities that can be used by the largestnumber of citizens and villagers, as well as population’s life quality improvement.The Republic of Kazakhstan pays special attention to fair competition issues. TheCompetition Protection Agency and its regional administrations monitor the marketpermanently with a view to repress manufacturers’ collusions and unfair competition.Samruk-Energo Group of Companies strives to do its business according to the bestworld practice. Increase of market share and operational profit enhancement areattained through application of fair and competitive practices. Within 2010 Samruk-Energo Group of Companies did not receive competition hindrance statements on thepart of the regulatory authority.9.1. Energy infrastructure planning and developmentUnder implementation of any investment project aimed at energy facilitiesconstruction, the Group Companies come through all procedures stepwise, starting withdecision-making, justification of investment, pre-project documentation development,coordination and approval, prior to a facility’s commissioning.In the phase of making the decision to construct a facility (the Balkhash CHP-Plant JSCand the Moynak HPP JSC) or increase the power of existing station (the third powergenerating unit at the GRES-2 station), Samruk-Energo JSC studies the Republic’sdemand for generating capacities and coordinates its actions with parties involved: theFund and state authorities (approval, financing and inclusion in the investmentprogram), partners and suppliers (equipment availability, delivery terms, etc.), thepopulation (the Pre-EIAP), etc.The project documentation is worked out by specialized scientific research or designorganizations having a license for performance of such type of activity. In the course ofpre-project and project documentation approval, branch and related organizationsneed to obtain preliminary consent of Samruk-Energo JSC as a shareholder. Aftergetting Samruk-Energo JSC’s approval, branch and related organizations should obtainreports from state regulatory authorities responsible for emergency situations,environment, sanitary epidemiological and construction technical examinations.The environment impact assessment procedure (hereinafter – the EIAP) is made in thecourse of working out the pre-scheduled, scheduled, pre-project and projectdocumentation proving economic and other activities (development, construction,reconstruction, temporary shutdown and liquidation) of large-scale and/orenvironment-damaging facilities and constructions. The EIAP is made in sequentialactions order (i.e. for pre-scheduled, scheduled, pre-project and projectdocumentation), each of which is completed by the state environmental expertisereport.Samruk-Energo Group of Companies interacts with local executive bodies with regard toassignment of lands and direct approval for a facility construction.Samruk-Energo Group of Companies interacts with other groups of parties involvedthrough organization of public hearings, teleconference bridges with authorizedagencies, including the Company’s shareholder, as well as by means of press-releases orsubmission of operating statements of the Group of Companies.62

9.2. Emergency planning, the implementation plan and trainingprograms in case of natural disasters/emergency situations andsalvage work plansAs in any production activity, there is a risk of incidents that can inflict harm both onthe Company, its employees and environment generally. In case of such incidents,Samruk-Energo Group of Companies has implementation plans focused on its mitigationand employees’ protection.Such implementation plans are worked out according to the Law of the Republic ofKazakhstan “On Civil Defense” dated May 7, 1997 № 100-I and are approved by anauthorized agency in places of branch and related organizations’ activity.Based on these implementation plans periodic trainings are provided for all employeesof Samruk-Energo Group of Companies by the Company’s safety and labor protectionservices. Herewith, priority importance is placed on practical exercise of training pointsby emergency situations most specific for and common to facilities of Samruk-EnergoGroup of Companies. In order to get hand-on experience and skills on safety methodsand actions in emergency situations, all categories of trained specialists are engagedregularly into exercises and trainings held at different levels and organized by theEmergency Situations Department in the region of branch and related organizationspresence. In particular, except for holding internal trainings and participation inexercises, branch and related organizations of the Group work in close cooperation withpreparation and trainings centers under the Emergency Situations Department in citiesof presence.9.3. Business unit analysis in point of corruption-related risksIn its activity Samruk-Energo JSC adheres to justice, good faith, transparency andresponsibility principles that are reflected in clause 6 of the Code of Business Conduct(approved by the decision of the Board of Directors dated June 24, 2008).The Company expects that third parties will assume similar obligations.The Code of Business Conduct of Samruk-Energo JSC is the Company’s fundamentaldocument enforcing norms of the legislation in power of the Republic of Kazakhstan, aswell as execution of business conduct standards.In such a way, the Company believes that everyday business relations of employees andcontractors are built on the transparency principle, thereby confirming negativeattitude in regard to corruption and bribes in Samruk-Energo Group of Companies.In order to prevent corruption in Samruk-Energo Group of Companies, some branch andrelated organizations hold activities for detection of unfair activities of Samruk-EnergoGroup of Companies departments. For example, in the reporting period Bogatyr KomirLLP has made scheduled and operational inspections of the following departments inorder to detect corrupt deeds of functionaries: the Bogatyr PTD, the RailwayEquipment Repairs Department, the Truck Fleet, the Bogatyr Strip Mine, the LogisticsDirectorate, the Staff and Social Policy Directorate (Spetsavtokolonna), the RepairsDirectorate (РГТО works), the Energy Supply Department, the Capital BuildingDirectorate and the Utility Vehicles Department.9.4. A part of employees who have completed trainings onorganization’s anti-corruption policies and proceduresIn support of ethically responsible corporate activities Samruk-Energo JSC is against thecorruption-related practice in any forms of its appearance.63

One of priorities of Samruk-Energo Group of Companies is observance of the Code ofBusiness Conduct and other approved corporate policies stipulating that any practicenot meeting anti-corruption canons of the company should not be used in order to gainpersonal benefit or any preferences for the Company obtained illegally.Along with the above mentioned, branch and related organizations strive to promotetransparency in all its interrelations and follow best practices in the field of businessconduct supporting this striving with employees’ awareness of anti-corruption policiesand procedures. Among Samruk-Energo Group of Companies, training in this field hasbeen provided in Bogatyr Komir LLP and SamrukEnergoStroyService LLP.Based on the Order of Bogatyr Komir LLP General Director №468 dated November 10,2009 Directors of the executive body, organisational units and other subdivisions haveorganized the process of employees’ familiarization with the approved “Unfair ActsCounteraction Policy of Bogatyr Komir LLP”. This Policy includes the followingprovisions:Unfair acts classification;Duties of Bogatyr Komir LLP employees in regard to risks of unfair acts;Organization of control activities focused on unfair acts detection;Liability of employees who have committed unfair acts.Measures on formation of employees’ anti-corruption world outlook have been takenconsecutively in SamrukEnergoStroyService LLP. An important component of activitiesheld by SamrukEnergoStroyService LLP is propaganda and explanation of the state anticorruptionpolicy. With this end in view, provisions of the Law of the Republic ofKazakhstan “On fight against corruption”, the State Program on Fight againstCorruption for 2006-2010 and other documents are communicated to all employees.Activities intended to improvement of quality and transparency of fulfilled missions arecarried out by the legal and the personnel departments of SamrukEnergoStroyServiceLLP. According to clause 38 of the Code of Business Conduct, SamrukEnergoStroyServiceLLP exerts every effort to avoid corrupt and other illegal actions both on the part ofstate authorities and on the part of SamrukEnergoStroyService LLP’s functionaries andemployees.9.5. Actions taken in response to corruption eventsSamruk-Energo Group of Companies promotes the state initiative on prevention andinvestigation of corruption facts. One of obligations of Samruk-Energo Group ofCompanies to shareholders, the state and the society is efficient administration andassets safety.The economic security department functioning in the company excludes any possibilitythat illegal actions, including corrupt, occur in the company, both in regard to newlyhired employees and those who are already employed by Territorial GeneratingCompany No. 5 (ЕПС-5) OJSC. Over 60% of security service employees have higher legaleducation, i.e. they have completed policies and procedures relating to human rights.In 2010 investigations were made in Bogatyr Komir LLP. Subsequent to results of madeinvestigations initiated by Bogatyr Komir LLP in 2009 and 2010, the following has beentaken:In 2009 21 employees were dismissed and a contract with a supplier wasterminated because of violations related to corruption;In 2010 28 employees were dismissed and a contract with a supplier wasterminated because of violations related to corruption.64

9.6. Attitude in regard to the state policy and participation in thestate policy formation and government relationsEnergy sector activities are exemplified by high degree of government regulation: thestate prescribes rates for electric power, as well as takes key decisions on issuesrelating to the sector restructuring. In order to provide accessible and reliable energysupply coordinated actions of electric power companies, the state and the society arenecessary.Samruk-Energo Group of Companies interacts actively with state authorities on issuesrelating to the sector' development strategy, consideration of electric power industryfunctioning and development peculiarities and the sector legislation reforming.A work on regulatory legal acts that specify organization of a generating capacitycompetitive trade on the electric power wholesale market has been carried outtogether with involved state authorities. A work on issues relating to rate regulationusing the “return on investment” method has been carried out too. In order to protectinterests of Samruk-Energo Group of Companies, Samruk-Energo JSC representativeshave participated in activities of working groups on coordination, development andapproval of projects on regulatory legal acts for development of electric power industryin the Republic of Kazakhstan. In such a way, offers and remarks to the following draftLaws of the Republic of Kazakhstan have been submitted:“On introduction of additions and alterations in some legislative acts of theRepublic of Kazakhstan on environmental issues”, namely in the EnvironmentalCode;the Criminal Code (as to criminal responsibility for violation of the environmentallegislation);the Administrative Violations Code (as to administrative responsibility for violationof the environmental legislation);“On introduction of additions and alterations in some legislative acts on issuesrelated to electric power industry, investing activities of natural monopoly entitiesand the regulated market”;the Law of the Republic of Kazakhstan “On joint-stock companies”.Additionally, offers on the following legislative documents have been made:the Project of the joined Order of the Natural Monopoly Regulation Agency and theMinistry of Industry and New Technologies “On introduction of alterations in thejoined order of the Natural Monopoly Regulation Agency Chairman and the Ministerof Industry and New Technologies “On approval of the list of activity types relatedto regulative services (goods, works) in the field of electric and heat powerindustry”;the Government Decree of the Republic of Kazakhstan dated August 19, 2002 № 918“On Regulations for execution of pre-project (feasibility studies) and project(design estimate) construction documentation examination regardless financingsources, as well as for approval of projects constructed at the cost of stateinvestments”;the Government Decree of the Republic of Kazakhstan dated January 20, 2004 № 56“On approval of Regulations for issue and suspension of the special water usepermit”;“Regulations for issue and suspension of the special water use permit” approved bythe Government decree January 20, 2004 № 56;“Regulations for approval of staff schedules and threshold labor payment level foradministrative officers of natural monopoly entities’ administrative staff being legalentities with the state’s interest in the charter capital and their affiliates”;65

the Order of the Chairman of the Republic of Kazakhstan Natural MonopolyRegulation and Competition Protection Agency dated January 27, 2003 № 16-ОД“On approval of the Instruction for consideration and approval of natural monopolyentities’ investment programs and (or) investment projects”.9.7. Financial and natural donationsIn the reporting period Samruk-Energo Group of Companies has allocated 4 417 000 KZTfor promotion of the Nur Otan People's Democratic Party activities.Penalties for non-compliance with the legislation and regulatory requirementsover Samruk-Energo Group of Companies (ths. KZT)Money penalties imposed fornon-compliance with thelegislation and regulatoryrequirements2010 2009242 825 26 92866

10. Product Liability67

Product Liability10.1. Consumer’s health and safetyThe GOST 13109-97 “Electric power quality standards in electricity supply systems ofgeneral purpose” that specifies electric power quality requirements has been workedout for the purpose of technical regulation and higher consumer’s safety. This statestandard is an obligatory for execution by Samruk-Energo Group of Companies.10.2. Product and service markingConsidering specificity of activities of Samruk-Energo Group of Companies, whoseoperation is related to electric power and coal industry, products marking is notapplied.10.3. Marketing communicationOwing to monopolistic or dominant position, marketing communication makes noeconomic sense for Companies of Samruk-Energo Group.10.4. Consumer’s privacy rightSamruk-Energo Group of Companies attaches prime significance to issues of privacy rightand protection of information about clients. With this aim in view each Company ofSamruk-Energo Group has determined the set of employees having authorized access toinformation of the company’s consumers and clients. Moreover, the client base is astrategic and commercial secret for the range of Companies of Samruk-Energo Group.Disclosure of information about the client data base for outsiders in relation to Samruk-Energo Group of Companies is made at the request of authorized agencies of theRepublic of Kazakhstan only.In the reporting period there have been no events of losing information about clientsamong Companies of Samruk-Energo Group.10.5. Compliance with requirementsSamruk-Energo Group of Companies carries out its activities within the limits of thelegislation in power. The legal department of Samruk-Energo JSC under the guidance ofSerik Tazabekov Kozhaevich, the legal issues managing director, performs continuouswork on compliance with all norms of the legislation in power. On a regular basis thelegal department performs monitoring of current and newly effective laws andTechnical Regulations in the field of electric power industry, environment, laborprotection and safety, as well as product quality.Adherence of Samruk-Energo Group of Companies to compliance with legislative normsand requirements is confirmed also by the fact that currently the Group Companiesperform works on installation of smoke filter units enabling to keep a significant part ofparticulate atmospheric emissions. These actions are regulated by technical regulationscoming to force in 2013 intended to reduction of negative environmental impact.10.6. Events of non-compliance with regulatory requirements andvoluntary codes relating to health and safety impact of productsand services68

In the reporting period there have been no events of non-compliance with regulatoryrequirements relating to health and safety impacts of products and services in Samruk-Energo Group of Companies.10.7. Consumer satisfaction appraisalConsumer satisfaction research is an important aspect of any organization’s activity.The Group Policy is provision of qualitative services according to established legislativerequirements. Currently Samruk-Energo Group of Companies has no a common approachto consumer satisfaction appraisal, and only a part of companies pursues the followingpolicies:Number of received claims is a consumer satisfaction index for Alatau ZharykKompaniyasy JSC. Each statement is considered on a case-by-case basis.Additionally, in order to obtain consumers’ opinion a Call-center is functioning, andthe section “Ask a question” has been created on the company’s Internet-site.Bogatyr Komir LLP holds meetings, negotiations and maintains correspondence withconsumers on a regular basis in order to determine the level of its clients’satisfaction;In the context of the implemented enterprise quality management systemEkibastuz GRES-2 Power Station JSC applies the “Consumer Satisfaction”procedure, whereby each consumer is delivered a letter with the offer to expresshis/her opinion about quality of the power stations’ operation;Considering specificity of its activities, as a company rendering services forreconstruction and upgrading of electric power complex facilities,SamrukEnergoStroyService LLP measures satisfaction of its clients by the number ofFacilities Timely Commissioning Acts and the Working Commission’s Act on theFacility.These researches are aimed at collection of customers’ opinions about the quality ofrendered services for further improvement of operating activities of the Group ofCompanies.10.8. Events of non-compliance with regulatory requirements andvoluntary codes relating to marketing communicationIn 2010 Samruk-Energo Group of Companies did not evidence non-compliance eventsbecause of reasons related to marketing and promotion of its products.10.9. Claims relating to violation of a consumer’s privacy rightIn the reporting period there have been no events of claims relating to violation ofconsumer's privacy right and loss of information about consumers in Samruk-EnergoGroup of Companies.Penalties for non-compliance with the legislation and regulatory requirements relating toprovision and usage of products and services over Samruk-Energo Group of Companies (ths.KZT)Money penalties imposed for noncompliancewith the legislation andregulatory requirements2010 20094819 233169

These penalties result from non-observance of the following legislations and regulatoryrequirements:Violation of the Law of the Republic of Kazakhstan “On railway transport”, article49: Payment for usage of coaches, containers and for idle period (parking, delay) ofrailway vehicles on train tracks;Violation of the Law of the Republic of Kazakhstan “On railway transport”, article77: Liability for non-fulfillment of a request under the cargo transportation plan;Violation of the Code of the Republic of Kazakhstan on administrative offence,article 147-5, item 3: Non-compliance with restrictions by a natural monopolyentity, as well as non-fulfillment or improper fulfillment (by a natural monopolyentity) of obligations on natural monopolies and regulated markets established bythe legislation of the Republic of Kazakhstan, except for the obligation onsubmission of information, a report and a notification to an authorized agencycarrying out management in the fields of natural monopolies and on regulatedmarkets.10.9. Traumas and fatal casualties of the population with theparticipation of the Company’s assetsTogether with advantages related to usage of electricity there are risks that sometimeslead to incidents and accidents with the participation of the population. These eventsare generally related to failures, unintended contacting with power transmission lines,electric wiring short circuit and unauthorized interruption of electric equipmentoperation:In 2009 three fatal accidents were registered. Official investigation acts datedSeptember 20, November 16 and December 24, 2009 relatively were drawn up onthese events;In 2010 five accidents took place, whereof four led to death of people. Theseevents were registered on May 2, June 5, June 11, June 18 and August 23, 2010relatively. Official investigations have been carried out by these events, and actshave been drawn up as of the dates of these accidents occurrence.10.10. Percentage ratio of the population not served in electricpower distribution or service zonesSamruk-Energo Group of Companies constitutes a vertically-oriented holding realizingpower station coal mining; production, transportation and distribution of heat andelectric power on the territory of the Republic of Kazakhstan.Electric power distribution is a primary activity of AZhK JSC, MEDC JSC andAlmatyEnergoSbyt LLP. AZhK JSC and AlmatyEnergoSbyt LLP serve 100% of consumptionin regions of presence. MEDC JSC transporting electric power from MAEK-Kazatompromnuclear power plant serves directly 23% of the population. Herewith, other distributioncompanies use MEDC JSC’s networks in order to supply other consumers in Mangistauprovince.10.11. Number of domestic consumers’ disconnection for nonpaymentIn 2010 37 004 events of consumers’ electric power supply disconnection because ofnon-payment were recorded.70

10.12. Electric power cut frequencyIn 2010 33 power failure events related to unscheduled breakdown of power generatingunits and electric power equipment were recorded over Samruk-Energo Group ofCompanies.10.13. Average electric power cut durationIn 2010 average electric power cut duration over Samruk-Energo Group of Companieswas 59,17 hours.Average electric power station availability factor2010 2009 Unit of measureGRES 83,86 84,97 %TPP 91,7 83,3 %HPP 88,25 60,5 %71

Annex 1: Abbreviations UsedAZhKAlESJSCSamruk-EnergoGroup of CompaniesGRESHPPBROZhGRESIMSCompanyKPIMEDCEIAPUNEPLPMAEMADPFFRPre-EIAPAPRPTDOIPCBsMTERRKEDCIASСО 2POPsEGRES-2 PSITP FEAAPLLPAlatau Zharyk KompaniyasyAlmaty Electric StationsJoint-Stock CompanySamruk-Energo JSC, its branch and related organizations and jointly controlledenterprisersState District Power StationHydroelectric Power PlantBranch and related organizationsZhambyl State District Power StationIntegrated Management SystemSamruk-Energo JSC Holding Company incorporated in the Republic of Kazakhstan,exercising branch and related organizations controlKey performance indicatorsMangistau Electronetwork Distribution CompanyEnvironment impact assessment procedureUnited Nations OrganizationsEnvironment protectionLabor protectionMaximum allowable emissionMaximum allowable dischargePreventive fire-fighting regulationsPreliminary environment impact assessment procedureAccident prevention regulationsProduction and Technical DepartmnetOperating instructionsPolychlorinated biphenylsMining-and-transport equipment repairsRepublic of KazakhstanElectronetwork Distribution CompanyInternal Auditing ServiceCarbon dioxidePersistent organic pollutantsEkibastuz GRES-2 Power Station“Innovative Technology Park” Free Economic Area in Almaty cityAccident preventionLimited Liability Partnership72

CHP-PlantTPPCADGRIISOCombined Heat Power PlantThermal Power PlantCentral Administrative DepartmentGlobal Reporting InitiativeInternational Organization for StandardizationUnits of MeasureGWhGJGcalkVkWhkmmm3MVAMWMln.Ths.GigaWatt-hourGigaJouleGigacalorieKiloVoltKiloWatt-hourKilometerMeterCubic meterMegaVolt-AmpereMegaWattMillionThousand% Percent73

Annex 2: Table of the Report Compliance with the GRIGuidelinesGRIIndexIndicator NameIndexFulfillmentReferences to OtherSourcesPage1.11.22.12.22.32.42.52.62.72.82.92.103.13.23.33.43.53.61. Стратегия и АнализStatement of the organization’s chiefexecutive officer+ 1Description of key impacts, risks andopportunities+ 142. Характеристика организацииName of the organization+ 8Primary brands, types of productsand/or servicesOperational structure of theorganization, including mainsubdivisions, operating companies,subsidiary companies and jointventuresLocation of the organization’sheadquartersNumber of countries where theorganization carries out its activitiesand names of countries whereprincipal activities are carried out orthat are particularly important interms of sustainability issues coveredby the reportOwnership nature and legalorganizational formMarkets served (including geographicalbreakdown, sectors served and types ofcustomers and beneficiaries)Scale of the organizationSignificant changes of scale, structure orownership taken place through thereporting periodAwards received in the reporting period+ 8+ 10+ 9+ 8+ 8+ 9+ 11+ 13+ 133. Параметры отчетаThe reporting period for informationprovided+ 5Date of most recent previous reports-publication (if any)not applicableReporting cycle+ 5Contact information for questionsregarding the report or its contentThe report content defining processThe report boundaries (for example,countries, leased subdivisions,+ 9+ 5+ 574

3.73.83.93.103.113.123.134.14.24.34.44.5subsidiary companies, capacities, jointventures, suppliers)Limitations on the report scope orboundaries+ 6Reasons for reporting on joint ventures,subsidiary companies, producing unitslease, outsourced functions and otherorganizational entities that can affect+ 5significantly comparability to previousreports and/or other organizationsData measurement and calculationmethods, including assumptions andtechniques applied to compilation of+ 6Indicators and other informationincluded in the reportDescription of meaning of anyinformation restatements provided inprevious reports, as well as reasons for-such restatements (for example,not applicablemergers/acquisitions, change ofreporting periods, business nature,appraisal techniques)Significant changes regarding previousreporting periods in coverage scope,-boundaries or measurement methods not applicableapplied in the reportThe table identifying location of+Standard Items in the report76The policy and applied practical+approaches in regard to external6approval of the report4. Управление, обязательства и взаимодействие с заинтересованными сторонамиGovernance structure of theorganization, including basiccommittees under the supremegoverning body responsible for specific+ 18missions, such as strategy developmentor general supervision of theorganization’s activitiesSpecify, whether the supremegoverning body Chairman is the+ 23company’s executive manager tooFor organizations that have a unitaryboard of directors, specify the numberof independent members of thesupreme governing body and/or+ 24members not relating to the company’sexecutive managementMechanisms that shareholders oremployees of the organization can useto direct the supreme governing body+ 25activities or provide it withrecommendationsLinkage between payments formembers of the supreme governingbody, executive management and chief+ 25executives (including dismissalcompensation) and organization’s75

4.64.74.84.94.104.114.124.134.144.154.164.17performance results (including socialand environmental results)Current processes in the supremegoverning body to ensure that conflicts+ 25of interests are avoidedProcesses for determination of thesupreme governing body members’qualification and competence in orderto define the organization’s strategy on+ 26economic, environmental and socialissues (of sustainable development)Internally developed statements of themission or values, codes of corporateconduct and principles significant interms of economic, environmental and+ 27social performance, as well as the levelof their state-of-the-practiceProcedures used by the supremegoverning body in order to supervisethe way the organization estimates itseconomic, environmental and socialperformance, including risks and+ 27opportunities, and adherence to orcompliance with internationalstandards, codes of corporate conductand principlesThe self-performance appraisal processfor the supreme governing body,particularly relative to organization’s+ 28economic, environmental and socialperformance resultsExplanation of whether and how theorganization applies the precautionary+ 28principleExternally developed economic,environmental and social charters,principles or other initiatives that the+ 28organization has joined or is promotingMemberships in associations (forexample, industrial) and/or national andinternational organizations on+ 28protection of interestsThe list of parties involved that theorganization has cooperated with+ 29Reasons for identification and selectionof parties involved for the purpose of+ 29further cooperation withApproaches to cooperate with partiesinvolved, including cooperationfrequency by forms and stakeholder+ 29groupsKey subjects and interests taken up orrevealed through cooperation withparties involved and the way theorganization has responded to those+ 29key subjects and interests, includingthrough its reporting tooПоказатели экономической результативности76

ЕС Management approach + 32Generated and distributed directeconomic value, including profits,operational expenditures, employeeEC1 payments, donations and othercommunity investments, undistributedprofit, payments to capital supplier andstates+ 35EC3EC4EC5EC6EC7EC8EC9Provision of the organization’sobligations related to the pension planwith fixed allowances+ 35Significant financial assistance receivedfrom state government bodies + 35The range of standard entry-level wageand fixed minimum wage ratios insignificant regions of the organization’sactivitiesThe policy, practical approaches tolocal supplier purchases and proportionof such purchases in significant regionsof the organization’s activitiesThe local population hiring procedureand proportion of chief executiveshired from the local population insignificant regions of the organization’sactivitiesDevelopment and impact ofinfrastructure investments and servicesprovided for public benefit primarilythrough commercial, in-kind andcharity engagementUnderstanding and description ofsignificant indirect economic impacts,including the sphere of influenceПоказатели экологической результативности+ 36+Samruk-Energo JSCannual report for 2010,pages 52-53, 112-113+ 36+ 36+ 37EN Management approach + 40EN1EN3EN5Materials used indicating weight orvolume + 43Direct energy consumption indicatingprimary energy sources + 44Energy saved due to energyconservation and energy efficiencyimprovement activities+ 44EN8 Total water withdrawal by sources + 44EN10EN11EN20Percentage and total volume ofrecycled and reused water + 45Location and area of lands owned,leased, managed by the organizationand situated in natural protection areasand areas of high biodiversity valueoutside protected areas or adjacent tosuch territoriesEmissions of NOx, SOx and othersignificant pollutants into theatmosphere indicating type and weight+ 45+ 4577

EN21Total discharge volume indicating wastewater quality and receiving facility + 45EN28Monetary value of significant fines andtotal number of non-monetary sanctionsimposed for non-compliance with theenvironmental legislation and regulatoryrequirements+ 46Показатели результативности подходов к организации труда и достойного трудаLA Management approach + 48LA1LA2LA3LA4LA5LA6LA7LA8LA10LA11LA12Total workforce number by employmenttype, labor agreement and region + 48Total number of employees andemployee turnover by age group,gender and regionBenefits and allowances provided toemployees working under full-timeemployment terms that are notprovided to employees working undertemporary or part-time employmenttermsб by principal activities+ 51+ 52Percentage of employees covered bythe collective agreement + 52Minimum notice period(s) regardingsignificant changes in the organization’sactivities, as well as whether it is (theyare) specified in the collectiveagreementPercentage of total staff represented inofficial joint health and safetycommittees with the participation ofadministration representatives and itsemployees taking part in monitoring andlaying down of recommendationsregarding occupational health andsafety programsIndustrial injuries level, occupationaldiseases level, lost days ratio andemployee absentee ratio, as well as thetotal number of work-related fatalcases, by regionsExisting education, training, consulting,risk prevention and control programs inorder to help employees, their familymembers and populationrepresentatives regarding devastatingdiseasesAverage number of training hours peremployee annually by employeecategoriesLifelong skill development andeducation programs destined to supportemployees’ employability, as well asrender them assistance upon carrierendingPercentage of employees receivingregular efficiency evaluation and carrier+ 52+ 52+ 53+ 54+ 55+ 55+ 5678

LA13development reviewsComposition of the organization’sgoverning bodies and staff by genderand age group, indicating minorityrepresentation, as well as otherdiversity indicators+ 56LA14Ratio of basic men and women salariesby employees’ category + 57HR Management approach + 61HR4HR5HR6HR7HR9Total number of discrimination casesand actions taken + 61Activities whereunder the right to usefreedom of association and to conductcollective bargaining can run significantrisks, and actions taken to supportthese rightsActivities whereunder there is asignificant risk of children employmentcases, and actions taken to participatein elimination of child laborActivities whereunder there is asignificant risk of forced or obligatorylabor usage events, and actions taken toparticipate in elimination of forced orobligatory laborTotal number of violation eventsinvolving rights of native and indigenouspeoples and actions taken+ 61+ 61+ 61+ 61Показатели результативности подходов к организации труда и достойного трудаSO Management approach + 63SO2SO3SO4SO5SO6SO8Percentage and total number ofbusiness units analyzed in regard tocorruption-related risksPercentage of employees who havecompleted trainings on organization’santi-corruption policies and procedures+ 64+ 65Actions taken in response to corruptionevents + 66Attitude in regard to the state policyand participation in the state policyformation and government relationsTotal monetary value of financial andnatural donations to political parties,policies and their related organizations,by countriesMonetary value of significant penaltiesand total number of non-financialsanctions imposed for non-compliancewith the legislation and regulatoryrequirements+ 67+ 68+ 68Показатели результативности: ответственность за продукциюPR Management approach + 70PR2 Total events of non-compliance with + 7179

PR5PR7PR8PR9regulatory requirements and voluntarycodes relating to health and safetyimpact of products and services, bytypes of consequencesPractices related to consumersatisfaction, including results ofconsumer satisfaction level appraisalsurveysTotal events of non-compliance withregulatory requirements and voluntarycodes relating to marketingcommunication, includingadvertisement, product promotion andsponsorship, by types of consequencesTotal number of substantiated claimsrelating to violation of a consumer'sprivacy right and loss of informationabout consumersMonetary value of significant penaltiesimposed for non-compliance with thelegislation and regulatory requirementsrelating to provision and usage ofproducts and services+ 71+ 71+ 72+ 72EU1EU2EU3EU4EU6EU7EU8EU10EU11EU12EU15Показатели отраслевого протокола GRI для электроэнергетикиRated capacity, by types of energysources and control mode+ 12Net power output, by types of energysources and control mode+ 12Number of domestic, industrial,institutional and commercial+ 12consumers’ personal accountsLength of overground and undergroundpower transmission lines and+ 12distribution lines by each control modeManagement approach ensuringperformance availability and reliability+ 33Demand and consumption levelmanagement programs, includingfederal, regional and municipalconsumption programs of profit andindustrial organizationsScientific research-and-developmentactivities and their conduction costsaimed at provision of reliable electricpower supply and promoting sustainabledevelopmentPlanned capacity compared to theForecast Electric Power Demand in longtermprospect, by types of energysources and control modeAverage electric power generationefficiency of thermal power plants, bytypes of energy sources and controlmodeElectric power transmission loss andpercentage ratio of total electric powervolumePercentage of employees at the ageenabling retirement within thefollowing 5 and 10 years, by job+ 33+ 34+ 37+ 38+ 38+ 5880

category and regionEU16The policy and requirements in regardto health care and safety of contractingand subcontracting organizations’+ 58employeesEU18Percentage of contractor’s andsubcontractor’s employees who havecompleted corresponding labor+ 59protection and accident preventiontrainingEU19Participation of a party involved in theprocess of making decisions related toplanning and development of power+ 63industry infrastructureEU21Emergency planning, theimplementation plan and trainingprograms in case of natural+ 64disasters/emergency situations andsalvage work plansNumber of traumas and fatal casualtiesof the population with the participationof the Company’s assets, includingEU25+ 72judicial decrees, settlements and legalproceedings under consideration relatedto diseasesPercentage ratio of the population notEU26 served in electric power distribution or+ 73service zonesEU27Number of domestic consumers’disconnection for non-payment, bydisconnection duration and control+ 73modeEU28 Electric power cut frequency + 73EU29 Average electric power cut duration + 73EU30Average electric power stationavailability factor, by types of energysources and control mode+ 7381