NOTE 1 - DESCRIPTION OF BUSINESS

BMB Munai, Inc., is a Nevada corporation that originally incorporated in the State of Utah in 1981. Since 2003, the Company’s business activities have focused on oil and natural gas exploration and production in the Republic of Kazakhstan (also referred to herein as the “ROK” or “Kazakhstan”) through its wholly-owned operating subsidiary Emir Oil LLP, (“Emir Oil”). Emir Oil holds an exploration contract that allows the Company to conduct exploration drilling and oil production in the Mangistau Province in the southwestern region of Kazakhstan until January 2013. The exploration territory of the contract area is approximately 850 square kilometers and is comprised of three areas, referred to herein as the ADE Block, the Southeast Block and the Northwest Block. The ADE Block, the Southeast Block and the Northwest Block are collectively referred to herein as “our properties.”

On February 14, 2011, the Company entered into a Participation Interest Purchase Agreement (the “Purchase Agreement”) with MIE Holdings Corporation, a company with limited liability organized under the laws of the Cayman Islands (“MIE”), and its subsidiary, Palaeontol B.V., a company organized under the laws of the Netherlands (“Palaeontol”), pursuant to which the Company agreed to sell all of its interest in Emir Oil to Palaeontol (the “Sale.”) The initial purchase price is $170 million and is subject to various closing adjustments and the deposit of $36 million in escrow to be held for a period of twelve months following the closing for indemnification purposes. In connection with the Sale, all intercompany notes of Emir Oil in favor of BMB will be transferred to Palaeontol. Upon consummation of the Sale, the Company will use a portion of the proceeds to repay the Company’s outstanding convertible senior notes and to pay transaction costs and expenses. The Company also intends to make an initial cash distribution from the Sale proceeds to stockholders in the estimated range of $1.04 to $1.10 per share upon the closing, after giving effect to the estimated closing adjustments and escrow holdback amount, repayment of the outstanding convertible senior notes and providing for the payment or reserve of other projected liabilities and transaction costs.  The Company intends to make a second distribution to stockholders that could range up to approximately $0.30 per share following termination of the escrow, subject to the availability of funds to be released from the escrow, actual costs incurred and other factors.

The Company has a representative office in Almaty, Republic of Kazakhstan.