KMG EP response to NC KMG announcement

KMG EP response to NC KMG announcement

The Independent Non-executive Directors ("INEDs") of JSC KazMunaiGas Exploration Production ("KMG EP" or the "Company") note the announcement earlier today by JSC NC KazMunayGas ("NC KMG") of its intention to modify the Proposed Amendments (the "Revised Amendments") and to increase the Purchase Offer. Capitalised terms used but not defined in this announcement have the meanings given to them in the response circular issued by the INEDs on 17 June 2016 (the "Response Circular").

Notwithstanding the removal by NC KMG of the proposed veto right with respect to nomination of future INEDs by the Nominations Committee, to which the INEDs have now consented, and having considered the additional materials published by NC KMG alongside their announcement earlier today, the INEDs believe that the arguments against the Revised Amendments set out in the Response Circular remain valid.

In summary the INEDs believe the Revised Amendments would still:

· significantly weaken the protections afforded to Independent Shareholders without justification or appropriate compensation;

· undermine the corporate governance of the Company and the commitments made by NC KMG at the Company's IPO; and

· stop the Company running its business independently of NC KMG.

The INEDs continue to believe the Revised Amendments are not required in order to achieve underlying efficiency and performance improvements sought by KMG EP and NC KMG.

The INEDs welcome the increased price offered by NC KMG under the Purchase Offer, but reiterate their view announced on 12 July: it is difficult to reconcile this increase with the statement by NC KMG that it is "not seeking to acquire a significant additional shareholding" and that it is "not making a takeover offer".

For the first time since the announcement of its proposals on 17 June 2016, and in light of strong feedback from Independent Shareholders in recent weeks, NC KMG has begun to admit that there is inherent value in the operations of KMG EP in addition to its cash balances. Despite the increase in the Purchase Offer, the INEDs believe that it continues to undervalue the Company.

Thus, the INEDs, having been so advised by HSBC and Rothschild, do not consider the Revised Amendments and the increased Purchase Offer to be fair or reasonable as far as Independent Shareholders of the Company are concerned and continue to strongly recommend that all Independent Shareholders of the Company vote against the resolutions to be proposed at the EGM.

The increase in the Purchase Offer also clearly demonstrates that NC KMG believes there is value to NC KMG from the increase in control afforded to NC KMG through the Revised Amendments. The INEDs believe that NC KMG must pay the right price for that increase in control and they remain available to NC KMG with a view to negotiating a full and final proposal.

As a reminder, GDR holders intending to vote by proxy should be aware of the following deadlines, which remain unchanged:

§ Custodial & subcustodial voting deadlines: from 15 - 20 July 2016 (note some deadlines may be earlier)

§ Broadridge voting platform deadline: 15 - 20 July 2016

§ ISS voting platform deadline: 15 - 18 July 2016

§ EGM proxy voting deadline (GDRs): 20 July 2016

This announcement contains inside information.

For shareholder information please contact:HSBC (+44 20 7991 8888)Simon Alexander, Peter Glover (Corporate Broker)Andrew Owens, Paul Connolly (Joint Financial Advisor)Rothschild (+44 20 7280 5000)David Hemmings, Victor Demirdal (Joint Financial Advisor)For media enquiries please contact:Brunswick Group (+44 207 404 5959)Carole Cablee-mail: [email protected]HSBC, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting for KMG EP and no one else in relation to the matters referred to in this announcement and will not be responsible to anyone other than KMG EP for providing the protections afforded to clients of HSBC nor for providing advice in relation to the contents of this announcement or any other matter referred to herein. This announcement has been issued by and is the sole responsibility of the INEDs.N M Rothschild & Sons Limited ("Rothschild"), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting for the Independent Non-Executive Directors of KMG EP and no one else in relation to the matter referred to in this announcement and will not be responsible to anyone other than the Independent Non-Executive Directors of KMG EP for providing the protections afforded to clients of Rothschild nor for providing advice.