Kazatomprom

KAZATOMPROM

The Atomic Company KAZATOMPROM is the national operator, of the Republic of Kazakhstan, for import and export of uranium, rare metals, nuclear fuel for power plants, special equipment and dual-purpose materials.100% of the Company’s stock is held by the Government under the National Welfare Fund SAMRUK-KAZYNA. At present, over 25,000 workers are employed by the Company. Kazatomprom is one of the world's leading uranium mining companies.

KAZATOMPROM is a holding - managing six (following) core activities:

• uranium prospecting/exploration and production;
• output of nuclear fuel cycle products;
• construction of reactors and nuclear power plants;
• non-ferrous metallurgy and production of construction materials;
• power industry;
• science;
• social welfare and personnel training.

Corporate Governance

NAC Kazatomprom JSC is seeking for continuous increase of the efficiency of its corporate governance system carrying out continuous monitoring and introduction of advanced world experience. The corporate governance in Kazatomprom is based on the following principles:

• protection of rights and interests of  the Shareholder;
• efficient management by the Board of Directors and by Management Board of Kazatomprom
• transparency and objectivity;
• legality and ethics;
• effective dividend policy;
• effective personnel policy;
• environment protection;
• occupational safety;
• arrangement of corporate conflicts and conflict of interests
• responsibility.

Kazatomprom corporate governance system includes:

1) Shareholder;

2) Board of Directors;

3) Management Board;

4) Internal Audit Service - the body controlling financial and business activity of the Company, carrying out an evaluation in the field of internal control, risk management and consultancy for improvement of Kazatomprom activity.

The structure of Kazatomprom corporate governance clearly defines the separation of powers between the bodies of NAC Kazatomprom.

Interaction between the Company's bodies is conducted in accordance with:

The Law of the Republic of Kazakhstan “On Joint Stock Companies”; The Law of the Republic of Kazakhstan “On the Domestic Welfare Fund”; NAC Kazatomprom JSC's Charter; NAC Kazatomprom JSC's Corporate governance code; The Regulations on NAC Kazatomprom JSC's board of directors and management board; The Procedure for interacting on issues concerning the provision of activities of Samruk-Kazyna JSC representatives on the boards of directors and supervisory boards of Samruk-Kazyna JSC Group companies; The Framework for the distribution of powers of joint stock company bodies, all voting shares of which are owned by

Samruk-Kazyna JSC; Decisions of the Sole Shareholder of NAC Kazatomprom JSC.

NAC Kazatomprom JSC strives to continuously improve its corporate governance system by carrying out continuous monitoring procedures and introducing global best practices.

The Company's main objectives in this area are:

• The introduction, distribution, monitoring and ensuring of an effective functioning of common management standards in all structural subdivisions and communities;
• The continuous improvement of interaction with shareholders,

employees, business partners and other stakeholders;

• Improving information policies and informational transparency;
• Ensuring effective long-term cooperation with local authorities

in order to promote social and economic regional development

Operational risks

Production of uranium and demand for the enriched uranium in the world depends generally on needs for fuel for the nuclear power plant. The market of production and uranium enrichment is highly concentrated and works mainly under long-term contracts which represent contracts with the fixed volumes or volumes, proceeding from requirements. The main risk for sector of production and uranium enrichment are negative consequences from failure on Fukushima. The complete termination of use of atomic energy in the world is improbable, however, apparently, it will not be possible to avoid toughening of regulation, delays of construction of the new nuclear power plants and a conclusion from nuclear power plant operation in some countries. It also can negatively affect fundamental indicators of the market of production and uranium enrichment.

Financial risks

The companies on production of uranium are subject to the risk connected with volatility of the prices for uranium. At the same time the future prices for an uranium zakis-oxide (U3O8) are under pressure after failure on Fukushima in March, 2011, and it can have long negative impact on profit and a cash flow of Kazatomprom. Fitch considers that the companies with low expenses have more advantageous positions for carrying out the investment projects, without subjecting risk solvency indicators in existing market conditions.

Increase in a role of the joint venture in production of uranium and EBITDA

 Kazatomprom

Being mainly extracting company, Kazatomprom is subject to risks of execution in the relation

existing and new uranium fields. It especially important taking into account a growing role

the unconsolidated joint ventures in production and Kazatomprom EBITDA. Risks on the Kazakhstan banking system Kazatomprom is still subject to risks on to the Kazakhstan banking sector, as company has considerable deposits in local banks, the main thing in a way in Halyk Bank («BB −» / a forecast "Stable"), being the related party, Bank Tsentrcredit

(B/forecast "Stable") and Kazkommertsbank («B −» / forecast "Stable"). As of December 31

2010 the company had money and deposits in the Kazakhstan banks of 72,1 billion tenge (489 million. dollars), or 72 % of the money and deposits on the named date. Taking into account rather low ratings of the main Kazakhstan Fitch banks continues to focus the analysis of the Kazakhstan structures – including Kazatomprom – on indicators gross leverage and security of a duty.