JPMorgan - KASE

Risk Factors Related to Our Operations in Kazakhstan
Adverse economic developments in Kazakhstan may materially affect our business.
Since its independence from the Soviet Union in December 1991, Kazakhstan has been
undergoing a rapid and uneven transition to a market-oriented economy and in prior years
experienced high inflation and rapid currency devaluation. In addition, instability in other
countries, such as Russia, has affected in the past, and may materially affect in the future,
economic conditions in Kazakhstan. Our results of operations are significantly dependent on the
Kazakhstani economy. We cannot assure you that the economic measures undertaken by the
Kazakhstani government will be successful in improving economic conditions or that the
transition to a market-oriented economy will be accomplished. Adverse economic conditions in
Kazakhstan could have a material adverse effect on our financial condition and results of
operations.
Changes in the political environment in Kazakhstan may adversely affect our business.
Kazakhstan is a former constituent republic of the Soviet Union. In 1991, it declared its
independence from the Soviet Union. At the time of its independence, it became a member of
the Commonwealth of Independent States. Because Kazakhstan has little history of political
stability as an independent nation, there is significant potential for social, political, economic,
legal and fiscal instability. These risks include, among other things:
Š local currency devaluation;
Š civil disturbances;
Š exchange controls or availability of hard currency;
Š changes in crude oil, export and transportation regulations;
Š changes with respect to taxes, royalty rates, import and export tariffs, and withholding
taxes on distributions to foreign investors;
Š changes in antimonopoly legislation;
Š nationalization or expropriation of property; and
Š interruption or blockage of oil exports.
Changes in Kazakhstani laws and regulations and the interpretation of those laws and
regulations may adversely affect our business.
HKM and HOP were privatised under Kazakhstan’s privatisation, foreign investment and oil and
gas laws, which are intended, among other things, to provide legislative protection against the
following:
Š expropriation without proper compensation for losses incurred;
Š retroactive application of new laws; and
Š imposition of environmental liabilities resulting from pre-existing conditions and activities
prior to acquisition.
Although these protections are consistent with Kazakhstan’s expressed intention of attracting
foreign investment, given Kazakhstan’s short legislative, judicial and administrative history, we
cannot predict how the legislative protections will be applied, if applicable, to HKM and HOP,
the possibility of any future changes in the political environment in Kazakhstan having an impact
on Kazakhstani laws and regulations or their interpretation or the effect of such changes on our
business, results of operations and financial condition.
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