Zhaikmunai

Part 3 : For preceding part double-click [nRn2A2713Y]
capital earnings

As of December 31, 2006 - 26,488 1,704 28,192
Translation difference - - 2,297 2,297
Net income - 36,330 - 36,330
As of December 31, 2007 - 62,818 4,001 66,819
Translation difference - - (702) (702)
Issue of Global Depositary Receipts (Note 8) 100,000 - - 100,000
Transaction costs (Note 8) (7,928) - - (7,928)
Net income - 63,478 - 63,478
As of December 31, 2008 92,072 126,296 3,299 221,667

The accounting policies and explanatory notes on pages 5
through 29 are an integral part of these consolidated
financial statements.

Chief Executive Officer of the General Partner of Zhaikmunai
LP
Kai-Uwe Kessel

Chief Financial Officer of the General Partner of Zhaikmunai
LP
Jan-Ru Muller

nOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2008

1. General

Zhaikmunai LP is a Limited Partnership formed on 29 August 2007 pursuant to the
Partnership Act 1909 of the Isle of Man. The Partnership is registered in the
Isle of Man with registered number 295P.

These consolidated financial statements include the results of the operations of
Zhaikmunai L.P. ("Zhaikmunai LP") and its wholly owned subsidiaries Frans Van
Der Schoot B.V. ("FVDS"), Claydon Industrial Limited (BVI) ("Claydon"), Jubilata
Investments Limited (BVI) ("Jubilata"), Zhaikmunai LLP ("the Partnership") and
Condensate Holdings LLP ("Condensate"). Zhaikmunai LP and its subsidiaries are
hereinafter referred to as "the Group". The Group's operations are primarily
conducted through its oil and gas producing entity Zhaikmunai LLP located in
Kazakhstan. The Group is ultimately indirectly controlled through Thyler
Holdings Limited, by Frank Monstrey. The General Partner of the Zhaikmunai LP is
Zhaikmunai Group Limited, which is responsible for the management of the Group.

The Partnership was established in 1997 for the purpose of exploration and
development of the Chinarevskoye oil and gas condensate field in the Western
Kazakhstan Region. The Partnership carries out its activities in accordance with
the Contract for Additional Exploration, Production and Production-Sharing of
Crude Hydrocarbons in the Chinarevskoye oil and gas condensate field (the
"Contract") dated October 31, 1997 in accordance with the license MG No. 253D
(the "License") for the exploration and production of hydrocarbons in
Chinarevskoye oil and gas condensate field between the State Committee of
Investments of the Republic of Kazakhstan and the Partnership.

On March 28, 2008 Zhaikmunai LP listed 10,000,000 Global Depository Receipts
('GDRs') at US$10 per GDR, representing 9.09% of the participating rights of the
Group, on the London Stock Exchange ('LSE').

The Group was formed through a reorganization of entities under common control
on March 28, 2008 to enable the listing of GDRs on the LSE. These consolidated
financial statements have been prepared using the pooling of interest method
and, as such, the financial statements have been presented as if the transfers
of the Group interests in Frans Van Der Schoot B.V., Claydon, Jubilata,
Zhaikmunai LLP and Condensate had occurred from the beginning of the earliest
period presented.

The registered address of the Zhaikmunai L.P. is: Anglo International House,
Lord Street, Douglas, IM1 4LN.

These consolidated financial statements were authorized for issue by Kai-Uwe
Kessel, Chief Executive Officer of the General Partner of Zhaikmunai LP and by
Jan-Ru Muller, Chief Financial Officer of the General Partner of Zhaikmunai LP
on April 30, 2009.

Licence terms

The term of the license of the Partnership originally included a 5 year
exploration period and a 25 year production period. The exploration period was
initially extended for additional 4 years and then for further 2 years according
to the supplements to the Contract dated January 12, 2004 and June 23, 2005,
respectively. In accordance with the supplement dated June 5, 2008, Tournaisian
North reservoir entered into production period as at January 1, 2007. Following
additional commercial discoveries during 2008, the exploration period under the
license, other than for the Tournasian horizons, was extended for an additional
3 year period with a new expiry on May 26, 2011.

The extensions to the exploration periods have not changed the license term,
which will expire in 2031.

Royalty Payments

The Partnership is required to make monthly royalty payments throughout the
entire Production Period, at the rates specified in the Contract.

Royalty rates depend on crude oil recovery levels and the phase of production
and can vary from 2% to 6% and 2% to 7% of produced petroleum and natural gas,
respectively.

Government "profit share"

The Partnership makes payments to the Government of its "profit share'' as
determined in the Contract. The "profit share" depends on crude oil production
levels and varies from 10% to 40% of production after deducting royalties and
reimbursable expenditures. Reimbursable expenditures include operating expenses,
costs of additional exploration and development costs. Government profit share
is expensed as incurred.

2. BASIS OF PREPARATION

These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). The financial statements
have been prepared under the historical cost convention except for financial
instruments.

The preparation of consolidated financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the Group's
accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 3.

Going Concern

These consolidated financial statements have been prepared on the basis that the
Group is a going concern, which assumes continuity of normal business activities
and realization of assets and settlement of liabilities in the ordinary course
of business.

As at December 31, 2008, with respect to the senior secured facility ('Facility
Agreement') (Note 9), the Partnership was in breach of the covenants related to
its EBITDA to interest expense and EBITDA to total indebtedness ratios. As at
the date of approval of these consolidated financial statements, BNP Paribas has
not waived their right to demand immediate repayment of the loans under the
Facility Agreement, which as at December 31, 2008 amounted to US$ 382 million.
The Company would not have sufficient funds to repay the loan in the event the
lenders exercise this right, which raises uncertainty as to whether the company
can continue as a going concern

Management believes the going concern basis of preparation to be appropriate as
the Group is currently in advanced discussions with possible finance providers
to secure US$ 300 million of financing and in connection therewith is also
negotiating with BNP Paribas for a restructuring of the existing Facility
Agreement such that the Group would no longer be in breach of covenants in the
Facility Agreement.

Under these scenarios, cashflow forecasts prepared by the Group indicate the
Group will be able to pay its debts as and when they fall due.

Adopted accounting standards and interpretations

The Group has adopted the following new and amended IFRS and International
Financial Reporting Interpretations Committee ("IFRIC") interpretations during
the year. Adoption of these revised standards and interpretations did not have
any effect on the financial performance or position of the Group.

IAS 23 Borrowing costs - amendment

IFRIC 11 / IFRS 2 Partnership and Treasury Share Transactions

IFRIC 12 Service Concession Arrangements

IFRIC 14 / IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction

IAS 23 Amended - Borrowing costs

This standard has been revised to require capitalization of borrowing costs when
such costs relate to a qualifying asset. A qualifying asset is an asset that
necessarily takes a substantial period of time to get ready for its intended use
or sale. This standard was early adopted by the Group and has no effect on the
financial position or performance of the Group.

IFRIC 11 / IFRS 2 - Partnership and Treasury Share Transactions

This interpretation requires arrangements whereby an employee is granted rights
to an entity's equity instruments to be accounted for as an equity-settled
scheme, even if the entity buys the instruments from another party, or the
shareholders provide the equity instruments needed. The amendment of its
accounting policy had no impact on the financial position or performance of the
Partnership.

IFRIC 12 Service Concession Arrangements

The IFRIC issued IFRIC 12 in November 2006. This interpretation applies to
service concession operators and explains how to account for the obligations
taken and rights received in service concession arrangements. The Group has no
such concessions, therefore this interpretation has no impact on the Group.

IFRIC 14 / IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction

IFRIC Interpretation 14 provides guidance on how to assess the limit on the
amount of surplus in a defined benefit scheme that can be recognized as an asset
under IAS 19 Employee Benefits. The Group does not have defined benefit schemes,
therefore the adoption of this interpretation had no impact on the financial
position or performance of the Group.

New accounting developments

The following IFRS and IFRIC interpretations are not yet in effect as at
December 31, 2008:

IFRS 1 First-time Adoption of International Financial Reporting Standards
- amendment

IFRS 2 Share-based Payment - Vesting Conditions and Cancellations -
amendment

IFRS 7 Financial Instruments: Disclosures - amendment "Improving
Disclosures about Financial Instruments"

IFRS 3R Business Combinations

IFRS 8 Operating Segments

IAS 1 Presentation of Financial Statements - amendment

IAS 27R Consolidated and Separate Financial Statements

IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of
Financial Statements -
Puttable Financial Instruments and Obligations Arising on Liquidation
- amendments

IAS 39 Financial Instruments: Recognition and Measurement - Eligible
Hedged Items - amendment

IFRIC 13 Customer Loyalty Programs

IFRIC 15 Agreements for the Construction of Real Estate

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 17 Distributions of Non-Cash Assets to Owners

IFRIC 18 Transfer of Assets from Customers

Amendments to IFRS 1 First-time Adoption of International Financial Reporting
Standards and IAS 27 Consolidated and Separate Financial Statements

The amendments to IFRS 1 allows an entity to determine the 'cost' of investments
in subsidiaries, jointly controlled entities or associates in its opening IFRS
financial statements in accordance with IAS 27 or using a deemed cost. The
amendment to IAS 27 requires all dividends from a subsidiary, jointly controlled
entity or associate to be recognised in the income statement in the separate
financial statement. Both revisions will be effective for financial years
beginning on or after 1 January 2009. The revision to IAS 27 will have to be
applied prospectively. The new requirements affect only the parent's separate
financial statement and do not have an impact on the consolidated financial
statements.

IFRS 2 Share-based Payment - Vesting Conditions and Cancellations

Amendments to IFRS 2 - Vesting Conditions and Cancellations was issued in
January 2008 and become effective for annual period on or after 1 January 2009.
The amendment clarifies that vesting conditions are service conditions and
performance conditions only. It also specifies that all cancellations, whether
by the entity or by other parties, should receive the same accounting treatment.
These amendments will have no impact on the financial position or performance of
the Group as the Group has not made any share based payments during 2008.

IFRS 3R Business Combinations and IAS 27R Consolidated and Separate Financial
Statements

The revised standards were issued in January 2008 and become effective for
financial years beginning on or after 1 July 2009. IFRS 3R introduces a number
of changes in the accounting for business combinations occurring after this date
that will impact the amount of goodwill recognised, the reported results in the
period that an acquisition occurs, and future reported results. IAS 27R requires
that a change in the ownership interest of a subsidiary (without loss of
control) is accounted for as an equity transaction. Therefore, such transactions
will no longer give rise to goodwill, nor will it give rise to a gain or loss.
Furthermore, the amended standard changes the accounting for losses incurred by
the subsidiary as well as the loss of control of a subsidiary. Other
consequential amendments were made to IAS 7 Statement of Cash Flows, IAS 12
Income Taxes, IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 28
Investment in Associates and IAS 31 Interests in Joint Ventures. The changes by
IFRS 3R and IAS 27R will affect future acquisitions or loss of control and
transactions with minority interests. The standards may be early applied.
However, the Group does not intend to take advantage of this possibility.

IFRS 8 Operating Segments

IFRS 8 was issued in November 2006 and becomes effective for financial years
beginning on or after 1 January 2009. This standard requires disclosure of
information about the Group's operating segments and replaced the requirement to
determine primary (business) and secondary (geographical) reporting segments of
the Group. This standard will have no impact on the financial position or
performance of the Group, as the Group has a single reportable segment.

IAS 1 Revised Presentation of Financial Statements

The revised Standard was issued in September 2007 and becomes effective for
financial years beginning on or after 1 January 2009. The Standard separates
owner and non-owner changes in equity. The statement of changes in equity will
include only details of transactions with owners, with non-owner changes in
equity presented as a single line. In addition, the Standard introduces the
statement of comprehensive income: it presents all items of recognised income
and expense, either in one single statement, or in two linked statements. The
Group is still evaluating whether it will have one or two statements.

IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial
Statements - Puttable Financial Instruments and Obligations Arising on
Liquidation

These amendments to IAS 32 and IAS 1 were issued in February 2008 and become
effective for financial years beginning on or after 1 January 2009. The
revisions provide a limited scope exception for puttable instruments to be
classified as equity if they fulfil a number of specified features. The
amendments to the standards will have no impact on the financial position or
performance of the Group, as the Group has not issued such instruments.

IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged
Items

These amendments to IAS 39 were issued in August 2008 and become effective for
financial years beginning on or after 1 July 2009. The amendment addresses the
designation of a one-sided risk in a hedged item, and the designation of
inflation as a hedged risk or portion in particular situations. It clarifies
that an entity is permitted to designate a portion of the fair value changes or
cash flow variability of a financial instrument as hedged item. The Group has
concluded that the amendment will have no impact on the financial position or
performance of the Group.

IFRS 7 Financial Instruments: Disclosures- amendment "Improving Disclosures
about Financial Instruments"

Amendments to IFRS 7 "Improving Disclosures about Financial Instruments" were
issued in March 2009 and become effective for periods beginning on or after 1
January 2009 with early application permitted. These amendments improve
disclosures of financial instruments and will have no impact on the financial
position or performance of the Group but will result in more detailed
disclosures regarding measurement of the fair value of financial instruments.

IFRIC 15 Agreement for the Construction of Real Estate

IFRIC 15 was issued in July 2008 and becomes effective for financial years
beginning on or after 1 January 2009. The interpretation is to be applied
retrospectively. It clarifies when and how revenue and related expenses from the
sale of a real estate unit should be recognised if an agreement between a
developer and a buyer is reached before the construction of the real estate is
completed. Furthermore, the interpretation provides guidance on how to determine
whether an agreement is within the scope of IAS 11 or IAS 18. IFRIC 15 will not
have an impact on the consolidated financial statement because the Group does
not conduct such activity.

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 16 was issued in July 2008 and becomes effective for financial years
beginning on or after 1 October 2008. The interpretation is to be applied
prospectively. IFRIC 16 provides guidance on the accounting for a hedge of a net
investment. As such it provides guidance on identifying the foreign currency
risks that qualify for hedge accounting in the hedge of a net investment, where
within the group the hedging instruments can be held in the hedge of a net
investment and how an entity should determine the amount of foreign currency
gain or loss, relating to both the net investment and the hedging instrument, to
be recycled on disposal of the net investment. IFRIC 16 will not have an impact
on the consolidated financial statement because the Group does not conduct such
activity.

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 17 was issued in November 2008 and becomes effective for financial years
beginning on or after 1 July 2009 with early application permitted. This
interpretation should be applied prospectively. IFRIC 17 provides guidance on
accounting for distributions of non-cash assets to owners. As such it provides
guidance on when to recognise a liability, how to measure it and the associated
assets, and when to derecognise the asset and liability and the consequences of
doing so. IFRIC 17 will have no impact on the financial position or performance
of the Group, as the Group does not distribute non-cash assets to its owners.

IFRIC 18 Transfers of Assets from Customers

IFRIC 18 was issued in January 2009 and becomes effective for financial years
beginning on or after 1 July 2009 with early application permitted, provided
valuations were obtained at the date those transfers occurred. This
interpretation should be applied prospectively. IFRIC 18 provides guidance on
accounting for agreements in which an entity receives from a customer an item of
property, plant and equipment that the entity must then use either to connect
the customer to a network or to provide the customer with ongoing access to a
supply of goods or services or to do both. The interpretation clarifies the
circumstances, in which the definition of an asset is met, the recognition of
the asset and its measurement on initial recognition, the identification of the
separately identifiable services, the recognition of revenue and the accounting
for transfers of cash from customers. IFRIC 18 will have no impact on the
financial position or performance of the Group, as the Group does not receive
assets from customers.

The management anticipates that the adoption of these Standards and
Interpretations in future periods will have no material impact on the
consolidated financial statements of the Group.

In May 2008 the Board issued its first omnibus of amendments to its standards,
primarily with a view to removing inconsistencies and clarifying wording. There
are separate transitional provisions for each standard. The Group adopted those
amendments and improvements to IFRSs which are applicable to its operating
activities in 2008.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Estimation and Assumptions

The key assumptions concerning the future, and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
material change to the carrying amounts of assets and liabilities within the
next financial year are discussed below:

Oil and gas reserves

Oil and gas reserves are a material factor in the Partnership's computation of
depreciation, depletion and amortization (the "DD&A"). The Partnership estimates
its reserves of oil and gas in accordance with the methodology of the Society of
Petroleum Engineers (the "SPE"). In estimating its reserves under SPE
methodology, the Partnership uses long-term planning prices which are also used
by management to make investment decisions about development of a field. Using
planning prices for estimating proved reserves removes the impact of the
volatility inherent in using year end spot prices. Management believes that
long-term planning price assumptions are more consistent with the long-term
nature of the upstream business and provide the most appropriate basis for
estimating oil and gas reserves. All reserve estimates involve some degree of
uncertainty. The uncertainty depends mainly on the amount of reliable geological
and engineering data available at the time of the estimate and the
interpretation of this data.

The relative degree of uncertainty can be conveyed by placing reserves into one
of two principal classifications, either proved or unproved. Proved reserves are
more certain to be recovered than unproved reserves and may be further
sub-classified as developed and undeveloped to denote progressively increasing
uncertainty in their recoverability. Estimates are reviewed and revised
annually. Revisions occur due to the evaluation or re-evaluation of already
available geological, reservoir or production data; availability of new data; or
changes to underlying price assumptions. Reserve estimates may also be revised
due to improved recovery projects, changes in production capacity or changes in
development strategy. Proved developed reserves are used to calculate the unit
of production rates for DD&A.

Impairment

The Group assesses at each reporting date whether there is any indication that
an asset may be impaired. If any such indication exists, the Group makes an
estimate of the asset's recoverable amount. An asset's recoverable amount is the
higher of an asset's or cash-generating unit's fair value less costs to sell and
its value in use and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those from other
assets or group of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that
reflects current market assessment of the time value of money and the risks
specific to the assets. The time value of money is determined based on weighted
average cost of capital of the Group. There were no impairment losses recognized
by the Group during the years ended December 31, 2008 and 2007.

Foreign Currency Translation

The functional currency of the entities of the Group is the Kazakhstani Tenge
("Tenge" or "KZT"). Transactions in foreign currencies are initially recorded at
the functional currency rate ruling at the date of transaction. Monetary assets
and liabilities denominated in foreign currencies are retranslated at the
functional currency rate of exchange ruling at the balance sheet date. All
differences are taken to profit or loss. Non monetary items that are measured in
terms of historical cost in a foreign currency are translated using the exchange
rates as at the dates of the initial transactions. Non monetary items measured
at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined.

The consolidated financial statements are presented in US Dollars (US$), which
is the presentation currency of the Group. As at the reporting date, the assets
and liabilities are translated into the presentation currency of the Group at
the rate of exchange ruling at the balance sheet date and the income statements
are translated at the weighted average exchange rates for the year. The exchange
differences arising on the translation are taken directly to equity.

Consolidation

The consolidated financial statements comprise the financial statements of the
Parent entity and its controlled subsidiaries (Note 1).

Inter-company transactions, balances and unrealized gains on transactions
between companies are eliminated. Unrealized losses are also eliminated but
considered as an impairment indicator of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.

Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more
than one half of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group and
continue to be consolidated until the date that such control ceases.

Minority interests represent the portion of profit or loss and net assets that
is not held by the Group and are presented separately in the consolidated income
statement and within equity in the consolidated balance sheet, separately from
parent shareholder's equity.

The differences between the carrying values of net assets attributable to
interests in subsidiaries acquired and the consideration given for such
increases are charged or credited to retained earnings.

Purchases of controlling interests in subsidiaries from entities under common
control

Purchases of controlling interests in subsidiaries from entities under common
control are accounted for using the pooling of interests method.

The assets and liabilities of the subsidiary transferred under common control
are recorded in these consolidated financial statements at the historical cost
of the controlling entity. Any difference between the total book value of net
assets and the consideration paid is accounted for in the consolidated financial
statements as an adjustment to the shareholders' equity.

These consolidated financial statements, including corresponding figures, are
presented as if a subsidiary had been acquired by the Group on the date it was
originally acquired by the controlling entity.

Property, Plant and Equipment

Oil and Gas Properties

Geological and geophysical exploration costs are charged against income as
incurred. Costs directly associated with an exploration well are capitalized
within property, plant and equipment (construction work-in-progress) until the
drilling of the well is complete and the results have been evaluated. These
costs include employee remuneration and materials and fuel used, rig costs and
payments made to contractors. If hydrocarbons are not found, the exploration
expenditure is written off as a dry hole. If hydrocarbons are found and, subject
to further appraisal activity, which may include the drilling of further wells
(exploration or exploratory-type stratigraphic test wells), are likely to be
capable of commercial development, the costs continue to be carried as an asset.
All such carried costs are subject to technical, commercial and management
review at least once a year to confirm the continued intent to develop or
otherwise extract value from the discovery. When this is no longer the case, the
costs are written off.

All capitalized costs of oil and gas properties are amortized using the
unit-of-production method based on estimated proved developed reserves of the
field, except in the case of assets that have a useful life shorter than the
lifetime of the field, in which case the straight line method is applied.

Oil and Gas Reserves

Proved oil and gas reserves are estimated quantities of commercially viable
hydrocarbons which existing geological, geophysical and engineering data show to
be recoverable in future years from known reservoirs.

The Partnership uses the reserve estimates provided by an independent appraiser
to assess the oil and gas reserves of its oil and gas fields. These reserve
quantities are used for calculating the unit of production depreciation rate as
it reflects the expected pattern of consumption of future economic benefits by
the entity.

Impairment of non-financial assets

The Group assesses assets or groups of assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. Individual assets are grouped for impairment assessment purposes at
the lowest level at which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets. If any such indication
of impairment exists or when annual impairment testing for an asset group is
required, the Group makes an estimate of its recoverable amount. An asset
group's recoverable amount is the higher of its fair value less costs to sell
and its value in use. Where the carrying amount of an asset group exceeds its
recoverable amount, the asset group is considered impaired and is written down
to its recoverable amount. In assessing value in use, the estimated future cash
flows are adjusted for the risks specific to the asset group and are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money.

An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognized impairment loss is reversed only if there has
been a change in the estimates used to determine the asset's recoverable amount
since the last impairment loss was recognized. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset in prior
years. Such reversal is recognized in the income statement.

After such a reversal, the depreciation charge is adjusted in future periods to
allocate the asset's revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.

Other Properties

All other property, plant and equipment are stated at historical cost less
depreciation. Historical cost includes expenditures that are directly
attributable to the acquisition of the items. Subsequent costs are included in
the asset's carrying amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably. All
other repairs and maintenance are charged to the income statement during the
year in which they are incurred.

Depreciation is calculated on a straight-line basis over the estimated useful
lives of the assets as follows:

Years
Buildings and Improvements 7-15
Vehicles 8
Machinery and Equipment 3-13
Other 3-10

Borrowing Costs

The Group capitalizes borrowing costs on qualifying assets. Assets qualifying
for borrowing costs capitalization include all assets under construction that
are not being depreciated, depleted, or amortized, provided that work is in
progress at that time. Qualifying assets mostly include wells and other oilfield
infrastructure under construction. Capitalized borrowing costs are calculated by
applying the capitalization rate to the expenditures on qualifying assets. The
capitalization rate is the weighted average of the borrowing costs applicable to
the Group's borrowings that are outstanding during the period.

Inventories

Inventories are stated at the lower of cost or net realizable value ("NRV").
Cost of oil is determined on the weighted-average method and other inventories
are also valued using the weighted average cost method. Net realizable value is
the estimated selling price in the ordinary course of business, less selling
expenses.

Accounts Receivable

Accounts receivable are recognized and carried at original invoice amount less
an allowance for any uncollectible amounts. An estimate for uncollectible
amounts is made when collection of the full amount is no longer probable. These
estimates are reviewed periodically, and as adjustments become necessary, they
are reported as expense (credit) in the period in which they become known. Bad
debts are written off when identified.

Borrowings

Borrowings are recognized initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortized cost using the
effective interest rate method. Any difference between the proceeds (net of
transaction costs) and the redemption value is recognized in the consolidated
financial information over the period of the borrowings using the effective
interest method.

Gains and losses are recognized in the income statement when the liabilities are
derecognized or impaired, as well as through amortization of the borrowings
using the effective interest method.

Provisions

Provisions are recognized when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation
and a reliable estimate of the amount of the obligation can be made.

Abandonment and site restoration (decommissioning)

Provision for decommissioning is recognized in full, on a discounted cash flow
basis, when the Group has an obligation to dismantle and remove a facility or an
item of plant and to restore the site on which it is located, and when a
reasonable estimate of that provision can be made. The amount of the obligation
is the present value of the estimated expenditures expected to be required to
settle the obligation adjusted for expected inflation and discounted using
average long-term interest rates for emerging market debt adjusted for risks
specific to the Kazakhstan market. The unwinding of the discount related to the
obligation is recorded in finance costs. A corresponding tangible fixed asset of
an amount equivalent to the provision is also created. This asset is
subsequently depreciated as part of the capital costs of the oil and gas
properties on a unit-of-production basis.

Changes in the measurement of an existing decommissioning liability that result
from changes in the estimated timing or amount of the outflow of resources
embodying economic benefits required to settle the obligation, or changes to the
discount rate:

(a) are added to, or deducted from, the cost of the related asset in the
current period. If deducted from the cost of the asset the amount deducted shall
not exceed its carrying amount. If a decrease in the provision exceeds the
carrying amount of the asset, the excess is recognized immediately in the income
statement; and

(b) if the adjustment results in an addition to the cost of an asset, the
Group considers whether this is an indication that the new carrying amount of
the asset may not be fully recoverable. If it is such an indication, the Group
tests the asset for impairment by estimating its recoverable amount, and
accounts for any impairment loss in accordance with IAS 36.

Financial assets

Financial assets within the scope of IAS 39 are classified as financial assets
at fair value through profit or loss, loans and receivables, held-to-maturity
investments, or available-for-sale financial assets, as appropriate. When
financial assets are recognized initially, they are measured at fair value,
plus, in the case of investments not at fair value through profit or loss,
directly attributable transaction costs.

The Partnership determines the classification of its financial assets on initial
recognition and, where allowed and appropriate, re-evaluates this designation at
each financial year end.

All regular way purchases and sales of financial assets are recognized on the
trade date, which is the date that the Partnership commits to purchase the
asset. Regular way purchases or sales are purchases or sales of financial assets
that require delivery of assets within the period generally established by
regulation or convention in the marketplace.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss includes financial assets
held for trading and financial assets designated upon initial recognition as at
fair value through profit or loss.

Financial assets are classified as held for trading if they are acquired for the
purpose of selling in the near term. Derivatives, including separated embedded
derivatives are also classified as held for trading unless they are designated
as effective hedging instruments or a financial guarantee contract. Gains or
losses on investments held for trading are recognized in profit or loss.

The Partnership assesses whether embedded derivatives are required to be
separated from host contracts when the Partnership first becomes party to the
contract. Reassessment only occurs if there is a change in the terms of the
contract that significantly modifies the cash flows that would otherwise be
required.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at banks and at
hand and short-term deposits with an original maturity of three months or less.

Financial liabilities

Interest bearing loans and borrowings

All loans and borrowings are initially recognized at fair value less directly
attributable transaction costs, and have not been designated as "at fair value
through profit or loss".

After initial recognition, interest bearing loans and borrowings are
subsequently measured at amortized cost using the effective interest method.

Gains and losses are recognized in profit or loss when the liabilities are
derecognized as well as through the amortization process.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired
for the purpose of selling in the near term. Derivatives, including separated
embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments. Gains or losses on liabilities held
for trading are recognized in profit or loss.

Derivative financial instruments and hedging

The Partnership uses a hedging contract for oil export sales to cover part of
its risks associated with oil price fluctuations. Such derivative financial
instruments are initially recognized at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair
value. Derivatives are carried as assets when the fair value is positive and as
liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value on derivatives during the
year that do not qualify for hedge accounting are taken directly to profit or
loss.

The fair value of financial instruments contracts is determined by reference to
market values for similar instruments.

Taxation

Deferred tax assets and liabilities are calculated in respect of temporary
differences using the balance sheet method. Deferred income taxes are provided
for all temporary differences arising between the tax bases of assets and
liabilities and their carrying values for financial reporting purposes, except
where the deferred income tax arises from the initial recognition of goodwill or
of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss.

A deferred tax asset is recorded only to the extent that it is probable that
taxable profit will be available against which the deductible temporary
differences can be utilized. Deferred tax assets and liabilities are measured at
tax rates that are expected to apply to the period when the asset is realized or
the liability is settled, based on tax rates that have been enacted or
substantively enacted at the balance sheet date.

Deferred income tax is provided on temporary differences arising on investments
in subsidiaries and associates, except where the timing of the reversal of the
temporary difference can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.

Trade and Other Payables

Trade and other payables are carried the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the
Group.

Revenue Recognition

The Partnership sells crude oil under short-term agreements priced by reference
to Platt's index quotations and adjusted for freight, insurance and quality
differentials.

Revenue from the sale of crude oil is recognized when delivery has taken place
and risks and rewards of ownership of the goods have passed to the customer.

Revenue is recognized when it is probable that the economic benefits associated
with the transaction will flow to the Partnership and the amount of revenue can
be reliably measured.

Expense Recognition

Expenses are accounted for at the time the actual flow of the related goods or
services occur, regardless of when cash or its equivalent is paid, and are
reported in the financial statements in the period to which they relate.

Social Tax and Deductions to Pension Fund

The Partnership contributes 21% of the gross income of employees as a Social tax
to the Government of the Republic of Kazakhstan. Social tax and related staff
costs are expensed as incurred.

The Partnership also withholds and contributes up to 10% from the salary of its
employees as the employees' contribution to their designated pension funds.
Under the legislation, employees are responsible for their retirement benefits
and the Partnership has no present or future obligation to pay its employees
upon their retirement.

4. Property, Plant and Equipment

The movement of property, plant and equipment for the year ended December 31,
2007 and 2008 was as follows:

In thousand of US Dollar Oil and gas Total Non oil and gas properties
properties oil and
gas
properties
Working CIP Buildings Machi-nery & Vehicles Others Total Total
assets Equip-ment non oil
gas
properties
Balance at December 31, 2006, net of accumulated depreciation 55,409 76,243 131,652 1,960 530 904 804 4,198 135,850
Additions 185 148,589 148,774 285 555 230 478 1,548 150,322
Transfers 44,553 (46,250) (1,697) 278 1,401 - 18 1,697 -
Disposal - (679) (679) - - (2) (5) (7) (686)
Depreciation charge (5,197) - (5,197) (247) (351) (161) (235) (994) (6,191)

More to follow, for following part double-click [nRn4A2713Y]