World class corporate governance is of vital importance to the success of companies in a free and increasingly competitive market. Companies need an efficient structure, defining the relationships between the Board of Directors, management and shareholders and offering assurance to investors that their funds are being used to strengthen the company, create value and increase market capitalisation. Compliance with these principles has taken on particular relevance since the Company’s IPO in 2006. While the IPO was primarily a capital–raising exercise for the Company, it was also a sign of the commitment to complying with all the financial reporting and corporate governance standards now expected of a truly international oil and gas producer.

The system of Corporate Governance at KMG EP is determined by a number of documents issued and decisions made in 2006.
The Company adopted the Kazakhstan Corporate Management Code, modified to include certain provisions from the Combined Code (which governs UK listed companies), as its Corporate Governance Code.

Corporate governance best practice in Kazakhstan is set out in the Kazakhstan Corporate Governance Code. The Kazakhstan Corporate Governance Code is based on existing international best practice in the area of corporate governance and sets out recommendations for applying the principles of corporate governance by Kazakhstan joint-stock companies. It was approved by the Expert Council for Securities Market Matters under the National Bank of the Republic of Kazakhstan in September 2002. The Code was also approved by the Association of Financial experts of Kazakhstan in March 2005 and by the Board of Emitters in February 2005.

The Kazakhstan Corporate Management Code is based on existing international best practices in corporate governance and sets out recommendations for applying the principles of corporate governance by Kazakhstan joint-stock companies. It was approved by the Expert Council for Securities Market Matters under the National Bank of the Republic of Kazakhstan in September 2002.
The relationship with the controlling shareholder is one of the key corporate governance issues. KMG EP signed a Relationship Agreement with its parent company NC KMG to ensure that the two companies conduct business in a transparent manner and on an arms-length basis. Under the Relationship Agreement the Company can operate its business independently and in the interests of all its shareholders.

The Company has incorporated certain provisions in its Charter. According to these provisions the Board of Directors now includes three Independent Non-Executive members who assist the Company in implementing good corporate governance arrangements. They are Christopher Mackenzie (left the Board in Macrh 2010), Paul Manduca and Edward Walshe.

Many of KMG EP’s activities, transactions, acquisitions, changes in Dividend policy, including those between the Company and NC KMG, can only take place if approved by a majority of the Independent Non-Executive Directors at the relevant meeting of the full Board of Directors.

The three Independent Non-Executive Directors work closely with other Directors and the Management Board to ensure that the Company complies with its corporate governance obligations. The Directors have adopted terms of reference for and have formed an Audit Committee, a Nominations Committee and a Remuneration Committee.
The Audit Committee focuses in particular on compliance with international and internal legal and accounting standards and controls. The Nominations Committee considers the composition of the Board of Directors, retirements and appointments as well as making appropriate recommendations on these issues. The Remuneration Committee has responsibility for making recommendations to the Board of Directors on the Company’s policy on the remuneration of key senior members of the Board and for maintaining reports for corporate governance purposes.
The Strategic Planning Committee was established on September 12, 2007.

In 2009 Committee held 4 meetings.

The Committee’s members are Askar Balzhanov, Kenzhеbek Ibrashev and Edward Walshe who also chairs the Committee.

The Strategic Planning Committee is focused on making recommendations to the Board of Directors on the Company’s priority directives and its development strategy.
The Risk Management Committee was established by the Management Board on December 27, 2007.

The Committee is staffed by the CEO, First Deputy General Director, CFO, Managing Director of Economy and Finance, Managing Director of Project Development, Managing Director of Information Technology, Managing Director of Personnel and Social Policy, head of the internal audit department, director of health, safety and environmental department.

On January 17, 2008 the Committee has approved the Risk Management Policy for further approval by the Board of Directors. The procedures plan on risk management for 2008 have also been approved by the Committee.

By rigorously following the financial and legal information disclosure requirements of the KASE and the LSE, the Company is becoming more open and transparent and is working more closely with the international teams of financial analysts and the investment community at large.

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