United States
                       Securities and Exchange Commission
                              Washington, DC 20549

                                   FORM 10-KSB

                   Annual Report under Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

For the Fiscal Year Ended                                 Commission File Number
     March 31, 2005                                              000-28638

                                 BMB MUNAI, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                                     NEVADA
          -------------------------------------------------------------
          (State or other jurisdiction of incorporation or organization

                                   30-0233726
                      ------------------------------------
                      (I.R.S. Employer Identification No.)

                20A Kazibek Bi Street, Almaty, Kazakhstan 480100
                ------------------------------------------------
                    (Address of principal executive offices)

                              +7 (3272) 58-85-17/47
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act: Common Stock $0.001
Par Value.

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes  [X]  No [ ]

Check if there is no disclosure of delinquent filers in response to item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

Indicate by check mark whether the registrant is an accelerated filer.
YES [ ] NO [X]

The registrant's revenues for its most recent fiscal year: $973,646

The aggregate market value of the voting stock held by non-affiliates based on
the average bid and ask prices of such stock on June 2, 2005 was approximately
$67,590,415.

As of June 2, 2005, the registrant had 31,958,846 shares of its $.001 par value
common stock outstanding.

Transitional small business disclosure format (check one)  Yes [ ]  No [X]

DOCUMENTS INCORPORATED BY REFERENCE:  None

<PAGE>

                                 BMB MUNAI, INC.
                                   FORM 10-KSB
                                TABLE OF CONTENTS


PART I                                                                      Page
                                                                            ----

Item 1.  Description of Business                                               3
Item 2.  Description of the Properties                                         3
Item 3.  Legal Proceedings                                                    18
Item 4.  Submission of Matters to Vote of Security Holders                    19

PART II

Item 5.  Market for Registrant's Common Equity and Related
           Stockholder Matters                                                19
Item 6.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                          22
Item 7.  Financial Statements                                                 32
Item 8.  Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosures                                          32
Item 8A. Controls and Procedures                                              32
Item 8B. Other Information                                                    32

PART III

Item 9.  Directors and Executives Officers of the Registrant                  33
Item 10. Executive Compensation                                               38
Item 11. Security Ownership of Certain Beneficial Owners and Management       39
Item 12. Certain Relationships and Related Transactions                       41
Item 13. Exhibits and Reports on Form 8-K                                     42
Item 14. Principal Accountant Fees and Services                               43

         Signatures                                                           44

                                       2
<PAGE>

                                 BMB MUNAI, INC.

         Unless otherwise indicated by the context, references herein to the
"Company", "BMB", "we", our" or "us" means BMB Munai, Inc, a Nevada corporation,
and its corporate subsidiaries and predecessors.

Forward Looking Information

         Certain of the statements contained in all parts of this document
including, but not limited to, those relating to our drilling plans, future
expenses, changes in wells operated and reserves, future growth and expansion,
future exploration, future seismic data, expansion of operations, our ability to
generate new prospects, our ability to obtain a production license, review of
outside generated prospects and acquisitions, additional reserves and reserve
increases, managing our asset base, expansion and improvement of capabilities,
integration of new technology into operations, credit facilities, new prospects
and drilling locations, future capital expenditures and working capital,
sufficiency of future working capital, borrowings and capital resources and
liquidity, projected cash flows from operations, future commodity price
environment, expectations of timing, the outcome of legal proceedings,
satisfaction of contingencies, the impact of any change in accounting policies
on our financial statements, the number, timing or results of any wells, the
plans for timing, interpretation and results of new or existing seismic surveys
or seismic data, future production or reserves, future acquisitions of leases,
lease options or other land rights, management's assessment of internal control
over financial reporting, financial results, opportunities, growth, business
plans and strategy and other statements that are not historical facts contained
in this report are forward-looking statements. When used in this document, words
like "expect," "project," "estimate," "believe," "anticipate," "intend,"
"budget," "plan," "forecast," "predict," "may," "should," "could," "will" and
similar expressions are also intended to identify forward-looking statements.
Such statements involve risks and uncertainties, including, but not limited to,
market factors, market prices (including regional basis differentials) of
natural gas and oil, results for future drilling and marketing activity, future
production and costs and other factors detailed herein and in our other
Securities and Exchange Commission filings. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated. These forward-looking
statements speak only as of their dates and should not be unduly relied upon. We
undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.

                                     PART I

Items 1 and 2. Business and Properties

Overview

         BMB Munai, Inc., is an independent oil and natural gas company engaged
in the exploration, development, acquisition and production of crude oil and
natural gas properties in the Republic of Kazakhstan (sometimes also referred to

                                       3
<PAGE>

herein as the "ROK" or "Kazakhstan"). During the fiscal year ended March 31,
2005, we changed our domicile from the State of Delaware to the State of Nevada.
We are currently in the development stage. Our current drilling strategy is
focused toward enhancing cash flows and increasing proved developed reserves by
drilling developmental wells within a proximity of existing wells, which we
believe decreases our likelihood of drilling a dry hole, while at the same time
increasing our current production and cash flow. As our cash flow and proved
developed reserves grow, we will begin drilling exploratory wells to find new
reservoirs or extend known reservoirs. We believe this strategy will result in
growth of proved developed reserves, production and financial strength.

Recent Developments

         At year end 2005, our net proved reserves were 40.9 million barrels of
oil equivalent ("BOE"), comprised of 34 million barrels of oil and 42 billion
cubic feet of natural gas. Reserves quoted in BOE were calculated using a
conversion of 6 Mscf/bbl. Crude oil accounted for approximately 83% of those
proved reserves. Approximately 40% of proved total reserves were developed as of
year-end 2005 and they were all located onshore in western Kazakhstan. We began
workover activities in December 2003 and drilling activities in July 2004.
Through the fiscal year ended March 31, 2005, we have re-entered three
previously existing wells and drilled two new wells. Of these five wells, one
well is currently in test production, three wells are undergoing testing and one
well is undergoing additional workover. In December 2004, the government of
Kazakhstan granted an extension of our ADE Block, which added an additional
64,247 acres (approximately 260 square kilometers) to the ADE Block. The
additional territory is adjacent to the ADE Block. In April 2005, we contracted
with TatArka, LLP for a 3D seismic survey of the extended territory. We believe
with the completion of a 3D seismic study and data processing and interpretation
of the results of this study, we will have sufficient information to evaluate
the oil and gas reserves of the extended territory, and prepare an efficient
work program for further exploration and development of the extended territory.

Strategy

         Our goal is to increase stockholder value by investing in oil and
natural gas projects with attractive rates of return on capital employed. We
plan to achieve this goal by exploiting and developing our existing oil and gas
properties and pursuing the acquisition of additional properties. We have and
will continue to focus on the following:

         Increasing our Production and Cash Flow. To sustain our operations we
need capital. To date, most of our operating capital has come from the sale of
our securities. We believe that to increase shareholder value and economic
stability, we need to increase our revenues by increasing our production. For
this reason, we have focused our efforts on drilling developmental wells
strategically located within proved areas with the intent to drill wells with a

                                       4
<PAGE>

high probability of success. We believe this strategy will allow us to increase
our current production and correspondingly our cash flows.

         Developing and Exploiting Existing Properties. We believe that there is
significant value to be created by drilling the identified undeveloped
opportunities on our properties. We own interest in 640 gross (640 net)
developed acres, plus 960 gross (960 net) acres of proved undeveloped reserves.
We also own interest in approximately 49,150 gross (49,150 net) unproved,
undeveloped acres. Our expected capital budget for development of existing
properties in fiscal 2006 is between $10 million and $14 million.

         Pursuing Profitable Acquisitions. While our emphasis in fiscal 2006 is
anticipated to focus on the further development of our existing properties, we
will continue to look for properties with both existing cash flow from
production and future development potential. We intend to pursue acquisitions of
properties that we believe have exploitation and development potential
comparable to or greater than our existing properties. We have an experienced
team of management professionals who will identify and evaluate acquisition
opportunities.

Oil and Natural Gas Reserves

         The following table sets forth our estimated net proved oil and natural
gas reserves and the present value of estimated cash flows related to such
reserves as of March 31, 2005. We engaged Chapman Petroleum Engineering, Ltd.
("Chapman"), to estimate our net proved reserves, projected future production,
estimated net revenue attributable to our proved reserves, and the present value
of such estimated future net revenue as of March 31, 2005. Chapman's estimates
are based upon a review of production histories and other geologic, economic,
ownership and engineering data provided by us. Chapman has independently
evaluated our reserves for the past nine months. In estimating the reserve
quantities that are economically recoverable, Chapman used oil and natural gas
prices in effect during March 2005 without giving effect to hedging activities.
In accordance with requirements of the Securities and Exchange Commission (the
"SEC") regulations, no price of cost escalation or reduction was considered by
Chapman. The present value of estimated future net revenues before income taxes
was prepared using constant prices as of the calculation date, discounted 10%
per annum on a pretax basis, and is not intended to represent the current market
value of the estimated oil and natural gas reserved owned by us. The oil and
natural gas reserve data included in or incorporated by reference in this
document are only estimates and may prove to be inaccurate.
<TABLE>
<CAPTION>
                                                                       Proved Reserves
                                                   ------------------------------------------------------------
                                                       Developed(1)         Undeveloped(2)            Total
                                                   -----------------    -------------------    ----------------
<S>                                                     <C>                    <C>                 <C>
Oil and condensate (MBbls)(3)                              13,614                 20,344              33,958
Natural gas (MMcf)                                         15,917                 25,817              41,734
   Total BOE (MBbls)                                       16,267                 24,647              40,914

Estimated future net revenue before income
  taxes (M$)                                            $ 183,285              $ 263,603           $ 446,888

Present value of estimated future net
  revenue before income taxes (discounted
  10% per annum)(M$)(4)                                 $  61,881              $  24,107           $  85,988
</TABLE>

                                       5
<PAGE>

(1)  Proved developed reserves are proved reserves that are expected to be
     recovered from existing wells with existing equipment and operating
     methods.
(2)  Proved undeveloped reserves are proved reserves which are expected to be
     recovered from new wells on undrilled acreage or from existing wells where
     a relatively major expenditure is required for recompletion.
(3)  Includes natural gas liquids.
(4)  Estimated future net reserves represents estimated future gross revenue to
     be generated from the production of proved reserves, net of estimated
     future production and development costs, using the average oil and gas
     prices we had been receiving in the Kazakhstan domestic market, as of March
     31, 2005, which were $0.50 per MMbtu of natural gas and $21.27 per Bbl of
     oil.

         The reserve data set forth herein represents estimates only. Reserve
engineering is a subjective process of estimating underground accumulations of
oil and natural gas that cannot be measured in an exact manner. The accuracy of
any reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. As a result, estimates
made by different engineers often vary from one another. In addition, results of
drilling, testing and production subsequent to the date of an estimate may
justify revision of such estimates, and such revisions may be material.
Accordingly, reserve estimates are generally different from the quantities of
oil and natural gas that are ultimately recovered. Furthermore, the estimated
future net revenue from proved reserves and the present value thereof are based
upon certain assumptions, including current prices, production levels and costs
that may not be what is actually incurred or realized.

         No estimates of proved reserves comparable to those included herein
have been included in reports to any federal agency other than the SEC.

         In accordance with SEC regulations, the Chapman Report used oil and
natural gas prices in effect at March 31, 2005. The prices used in calculating
the estimated future net revenue attributable to proved reserves do not
necessarily reflect market prices for oil and natural gas production subsequent
to March 31, 2005. There can be no assurance that all of the proved reserves
will be produced and sold within the periods indicated, that the assumed prices
will actually be realized for such production or that existing contracts will be
honored or judicially enforced.

Cost Information

         Capitalized Costs

         Capitalized costs and accumulated depletion, depreciation and
amortization relating to our oil and natural gas producing activities, all of
which are conducted in the Republic of Kazakhstan, are summarized below:

                                       6
<PAGE>
<TABLE>
<CAPTION>
                                                             For the year ended         For the period from inception (May
                                                               March 31, 2005                6, 2003 to March 31, 2004
                                                             -------------------        ----------------------------------
<S>                                                              <C>                             <C>
Developed oil and natural gas properties                         $ 43,031,811                    $ 6,495,186
Unevaluated oil and natural gas properties                                  -                              -
Accumulated depletion, depreciation and amortization                  (67,452)                             -
                                                                 ------------                   ------------
Net capitalized cost                                             $ 42,964,359                   $  6,495,186
                                                                 ============                   ============

Exploration, Development and Acquisition Capital Expenditures

         The following table sets forth certain information regarding the total
costs incurred associated with exploration, development and acquisition
activities.
<CAPTION>
                                                   For the Year Ended          For the Period from Inception
                                                     March 31, 2005           (May 6, 2003) to March 31, 2004
                                                 ------------------------    --------------------------------
<S>                                                   <C>                             <C>
Acquisition costs:
    Unproved properties                               $          -                    $          -
    Proved properties                                   20,788,119                       1,713,119
Exploration costs                                        3,373,092                       2,659,872
Development costs                                       18,870,600                       2,122,195
                                                      ------------                    ------------
   Subtotal                                             43,031,811                       6,495,186
Asset retirement costs                                           -                               -
                                                      ------------                    ------------
    Total costs incurred                              $ 43,031,811                    $  6,495,186
                                                      ============                    ============
</TABLE>

Oil and Natural Gas Volumes, Prices and Operating Expense

         The following table sets forth certain information regarding production
volumes, average sales prices and average operating expense associated with our
sale of oil and natural gas for the periods indicated.
<TABLE>
<CAPTION>
                                                                                       For the Period from
                                                          For the Year Ended         Inception (May 6, 2003)
                                                            March 31, 2005              to March 31, 2004
                                                         -----------------------    --------------------------
<S>                                                               <C>                          <C>
Production:
    Oil and condensate (Bbls)                                      68,755                          -
    Natural gas liquids (Bbls)                                          -                          -
    Natural gas (Mcf)                                                   -                          -
    Barrels of oil equivalent (BOE)                                     -                          -

Average Sales Price(1):
    Oil and condensate ($ per Bbl)                                $ 15.17                      $   -
    Natural gas liquids ($ per Bbl)                               $     -                      $   -
    Natural gas ($ per Mcf)                                       $     -                      $   -
    Barrels of oil equivalent ($ per BOE)                         $     -                      $   -

Average oil and natural gas operating expenses including
   production and ad valorem taxes ($ per BOE)(2)                 $  3.08                      $   -
</TABLE>
                                       7
<PAGE>

     (1) During the period from inception through the year ended March 31, 2005,
the Company has not engaged in any hedging activities, including derivatives.
     (2) Includes direct lifting costs (labor, repairs and maintenance,
materials and supplies), expensed workover costs and the administrative costs of
field production personnel, insurance and production and ad valorem taxes.

Drilling Activity

         The following table sets forth our drilling activity for the period
from inception (May 6, 2003) through March 31, 2004 and for the fiscal year
ended March 31, 2005. In the table, "Gross" refers to the total wells in which
we have a working interest or back-in working interest after payout and "Net"
refers to gross wells multiplied by our working interest therein.
<TABLE>
<CAPTION>
                                                     For the Year Ended                For the Period from Inception (May
                                                       March 31, 2005                     26, 2003) to March 31, 2004
                                            -------------------------------------    ---------------------------------------
                                                 Gross                Net                Gross                  Net
                                            ----------------    -----------------    ---------------     -------------------
<S>                                               <C>                 <C>                  <C>                    <C>
Exploratory:
    Productive                                            -                    -                  -                       -
    Non-productive                                        -                    -                  -                       -
                                            ----------------    -----------------    ---------------     -------------------
       Total                                              -                    -                  -                       -
                                            ----------------    -----------------    ---------------     -------------------

Development:
    Productive                                            5                    5                  -                       -
    Non-productive                                        -                    -                  -                       -
                                            ----------------    -----------------    ---------------     -------------------
       Total                                              -                    -                  -                       -
                                            ----------------    -----------------    ---------------     -------------------
Grand Total                                               5                    5                  -                       -
                                            ================    =================    ===============     ===================

Productive Wells

         The following table sets forth the number of productive oil and natural
gas wells in which we owned an interest as of March 31, 2005.
<CAPTION>
                                          Company-operated                Non-operated                     Total
                                      --------------------------    -------------------------    ---------------------------
                                       Gross           Net           Gross          Net           Gross           Net
                                      ---------    -------------    --------    -------------    --------    ---------------
<S>                                   <C>              <C>           <C>         <C>             <C>           <C>
Oil                                          5                5           -                -           5                  5
Natural Gas                                  -                -           -                -           -                  -
                                      ---------    -------------    --------    -------------    --------    ---------------
     Total                                   5                5           -                -           5                  5
                                      =========    =============    ========    =============    ========    ===============
</TABLE>

Our Properties

         We currently own a 100% interest in a license to use subsurface mineral
resources and a hydrocarbon exploration contract issued by the ROK in 1999 and
2000, respectively (collectively referred to herein as the "license" or the
"contract"). The original contract granted its holder the right to engage in
exploration and development activities in an area of approximately 50,000 acres
referred to as the ADE Block. The ADE Block is located onshore in Kazakhstan in
the Mangistau Oblast, approximately 50 kilometers from the Kazakhstan city of
Aktau, a seaport on the Caspian Sea. The ADE Block is comprised of three fields,
the Aksaz, Dolinnoe and Emir fields. When initially granted, the exploration and

                                       8
<PAGE>

development stage of the contract had a five year term. This time for
exploration and development has since been extended to June 9, 2007. If we
desire to move from the exploration and development stage to the commercial
production stage, we must make application to the ROK before June 9, 2007.

         During the fiscal year ended March 31, 2005, the territory covered
under the contract was expanded to include an additional 64,247 acres of land
adjacent to the ADE Block, (this land is sometimes referred to herein as the
"extended territory" or collectively included with the ADE Block as the "ADE
Block" or "our properties.") The extended territory is governed under the terms
of the original contract.

         Under the terms of our contract, we currently have the right to engage
in exploration and development activities within the ADE Block, as extended,
until June 9, 2007. We also have the right to gather and sell all oil and
natural gas we produce until June 9, 2007, with the revenue from such sales
belonging to BMB. During the fiscal year ended March 31, 2005, all sales were
made to the Kazakhstan domestic market. The average price per barrel in the
Kazakhstan domestic market is approximately $25-$30 per barrel lower than the
average world market price. With the completion of additional storage capacity,
we are now capable of exporting oil for sale in the world markets. We will apply
for permission from the government to begin exporting our production for sale in
the world markets. We anticipate realizing greater revenue per barrel in the
international world markets.

         To maintain our contract during the exploration and development stage
we are required to meet minimum annual capital expenditures in the exploration
and development of the ADE Block and the extended territory. The following table
shows the minimum capital expenditures we are required to make during the 2005
and 2006 calendar years and for the period from January 1, 2007 through June 9,
2007.

                  Year              Minimum Capital Expenditure
                  ----              ---------------------------
                  2005                      $9,300,000
                  2006                      $6,000,000
                  2007                      $4,500,000

         Under the terms of the contract, if we wish to move to commercial
production, we must apply to the ROK for commercial production rights. Under our
contract, we must apply for commercial production rights prior to the expiration
of the contract. The terms of our commercial production rights will negotiated
at the time we move to commercial production. During exploration and development
stage, we have the right to produce and sell oil and natural gas at a royalty
rate of 2%. When we move to commercial production, royalty rates are negotiated
and vary depending on the reserve and production rates. Royalty rates are
established by the taxing authorities of the ROK. The royalty rate is based on
production rates and the rate increases on a sliding scale. Current royalty
rates range for 2% to 6%. Commercial production rights may also require up to

                                       9
<PAGE>

20% of the oil sold to the Kazakhstan domestic market at considerably lower
prices than received in the world export markets, as discussed above.

         Under our contract, we have the exclusive right to negotiate for and
receive commercial production rights. The government is required to negotiate
the terms of these rights in good faith in accordance with the Law of Petroleum
of Kazakhstan. So long as we establish commercially producible reserves and have
fulfilled our obligations during exploration and development, the government is
required to grant us production rights. We have not yet applied for commercial
production rights because we enjoy certain economic advantages during
exploration and development as discussed herein.

         During fiscal 2005 we re-entered one well in the Aksaz field,
re-entered one well and drilled two new wells in the Dolinnoe field and
re-entered one well in the Emir field. Each of these wells was successfully
completed and is either in testing, test production or additional workover.
These wells accounted for 100% of our total production during the year. In
fiscal 2006 we expect to drill one additional well in the ADE block. This well
is planned in the Aksaz field. Because we were not granted the extended
territory until December 2004, we did not engage in any exploration or
development activities in the extended territory during the fiscal year ended
March 31, 2005.

Title to Properties

         We believe we have satisfactory title to all of our properties in
accordance with standards generally accepted in the oil and natural gas
industry. Our properties are subject to customary royalty interests, liens for
current taxes and other burdens, which we believe do not materially interfere
with the use of affect the value of such properties. As is customary in the
industry in the case of undeveloped properties, little investigation of record
title is made at the time of acquisition (other than a preliminary review of
local records). Detailed investigations are made before commencement of drilling
operations.

Marketing

         Currently we are selling all oil and natural gas produced to local
refineries at the domestic market price. Delivery is made by railcars filled at
the pouring station terminal located at the oil storage facility we lease.

         We anticipate that once we begin commercial production we will market
our production to third parties consistent with industry practices.

         In the domestic market, the price per barrel is lower than in world
markets. When we are able to access the world markets, our marketing objective
will be to receive the highest possible price for our product.

         There are a variety of factors which affect the market for oil and
natural gas, including the extent of domestic production and imports of oil and
natural gas, the availability, proximity and capacity of natural gas pipelines
and other transportation facilities, demand for oil and natural gas, the

                                       10
<PAGE>

marketing of competitive fuels and the effects of state and federal regulations
on oil and natural gas productions and sales.

Sales to Major Customers

         We sold production representing 10% or more or our total revenues for
the fiscal year ended March 31, 2005 as listed below.

                           Volume (Bbls)        Amount ($)       % of Sales
                           -------------        ----------       ----------
Atyrau Refinery                 43,959          $564,788            69%
LLC Shugla                      20,210          $408,858            31%

         We produced no crude oil or natural gas during the period from
inception (May 6, 2003) through March 31, 2004.

         In the exploration, development and production business, production is
normally sold to relatively few customers. Substantially all of our customers
are concentrated in the oil and gas industry, and revenue can be materially
affected by current economic conditions and the price of certain commodities
such as natural gas and crude oil the cost of which is passed through to the
customer. However, based on the current demand for natural gas and crude oil and
the fact that alternate purchasers are readily available, we believe that the
loss of any of our major purchasers would not have a long-term material adverse
effect on our operations.

Competition

         Hydrocarbons exploration is highly competitive. Competition in
Kazakhstan and Central Asia includes other junior hydrocarbons exploration
companies, mid-size producers and major exploration and production companies. We
will have to compete for additional exploration and production properties with
these companies who in most cases may have greater financial resources and
larger technical staff than us.

         We believe we have an advantage because we have a proven track record
with major former Soviet Union oil and gas and banking industry players forming
our board of directors and executive management team. We have several prominent
figures in the oil and gas industry and banking. In addition our staff has vast
domestic and international experience and has been working in Kazakhstan and
Russia for up to 30 years, and has developed relationships with the government
and its departments and ministries at many levels. We also employ experienced
national and foreign specialists at senior levels in our operating subsidiary.

         There is significant competition for capital with other exploration and
production companies and industry sectors. At times, other industry sectors may
be more in favor with investors limiting our ability to obtain necessary
capital.

                                       11
<PAGE>

Government Regulation

         Our operations are subject to various levels of government controls and
regulations in the United States and in Kazakhstan. We attempt to comply with
all legal requirements in the conduct of our operations and employ business
practices which we consider to be prudent under the circumstances in which we
operate. It is not possible for us to separately calculate the costs of
compliance with environmental and other governmental regulations as such costs
are an integral part of our operations.

         In Kazakhstan, legislation affecting the oil and gas industry is under
constant review for amendment or expansion. Pursuant to such legislation,
various governmental departments and agencies have issued extensive rules and
regulations which affect the oil and gas industry, some of which carry
substantial penalties for failure to comply. These laws and regulations can have
a significant impact on the industry by increasing the cost of doing business
and, consequentially, can adversely affect our profitability. Inasmuch as new
legislation affecting the industry is commonplace and existing laws and
regulations are frequently amended or reinterpreted, we are unable to predict
the future cost or impact of complying with such laws and regulations.

Risk Factors Relating to our Business

         Limited Capital Resources and Liquidity

         We are a development stage company and have not yet generated
significant production or revenues from the development of our primary
properties in Kazakhstan.

         While we have raised capital to fund acquisitions, undertake our first
year work program, including 3D seismic, processing and interpretation of the
data obtained during 3D seismic, re-entering old wells in the Aksaz, Dolinnoe
and Emir fields, well work over, construction of the ground facilities for
pre-sale oil processing, drilling of several new wells, start-up expenses, etc.,
we still lack sufficient capital to complete exploration and development of our
properties. Thus we are using more cash in operations than we are generating.
Furthermore, we anticipate that the development of our properties will require
substantial additional funding before we can achieve significant production and
revenues from operations.

         Inability to Obtain Additional Funding

         To satisfy future capital investment commitments and liquidity needs
with respect to our ongoing operations, we may require additional equity or debt
financing. Our ability to arrange financing and the cost of financing depends
upon many factors, including:

         [X]      economic and capital market conditions;
         [X]      investor confidence in the oil and gas industry, in Kazakhstan
                  and in the Company;

                                       12
<PAGE>

         [X]      credit availability from banks and other lenders; and
         [X]      provisions of taxes and securities laws that are conducive to
                  raising capital.

         The terms and conditions on which future funding or financing may be
made available may not be acceptable or available at all. If we issue capital
stock or convertible securities to raise funds, your ownership could be diluted
or new investors might obtain terms more favorable than yours. If we decide to
raise additional funds by incurring debt, we may become more leveraged and
subject to more restrictive financial covenants and ratios. Our inability to
procure sufficient financing could adversely affect our ability to implement our
business strategy.

         Failures to Satisfy our Commitments During Exploration and Development
         Stage

         We have committed to the government of Kazakhstan to make various
capital investments and to develop the ADE Block in accordance with specific
requirements during exploration and development. Additionally, to undertake
commercial production, we will need to apply for and be granted commercial
production rights. The requirements of our current license may be inconsistent
with the terms of any new licenses we are issued. Additionally, we may not be
able to satisfy all commitments in the future. If we fail to satisfy these
commitments our contract may be cancelled. The cancellation of our contract
could have a material adverse effect on our business, results of operations and
financial condition. Although we would seek waivers of any breaches or to
renegotiate the terms of our commitments, we cannot assure you that we would be
successful in doing so.

         Inadequate Infrastructure

         Our exploration and development activities could suffer due to
inadequate infrastructure in the region. We are working to improve the
infrastructure on our properties. Any problem or adverse change affecting our
operational infrastructure, or infrastructure provided by third parties, could
have a material adverse effect on our financial condition and results of
operations. Similarly, if we are unsuccessful in developing the infrastructure
on our properties it could have a material adverse effect on our financial
conditions and results of operations.

         Reliance on Third Parties for Transportation Systems

         The crude oil we produce must be transported through pipelines or by
rail. These pipelines and railways are operated by state-owned entities or other
third parties, and there can be no assurance that these transportation systems
will always be functioning and available, or that the transportation costs will
remain at acceptable levels. In addition, any increase in the cost of pipeline
transportation or reduction in its availability to us could have a material
adverse effect on our results of operations. There can be no assurance that we
will be able to procure sufficient transportation capacity on economical terms,
if at all.

                                       13
<PAGE>

         Liquidity of our Common Shares

         Our stock has limited trading volume on the Over-the-Counter Bulletin
Board and is not listed on a national exchange. Moreover, a significant
percentage of our outstanding common stock is "restricted" and therefore subject
to the resale restrictions set forth in Rule 144 of the rules and regulations
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933. These factors could adversely affect the liquidity, trading volume,
price and transferability of our common shares.

         Control by our Officers and Directors

         In the aggregate, our executive officers and directors control
approximately 40% of the outstanding shares of our common stock. Such
concentrated control may adversely affect the price of our common stock. Our
officers and directors may be able to exert significant influence, or even
control, over matters requiring approval by our security holders, including the
election of directors. Such concentrated control may also make it difficult for
our shareholders to receive a premium for their shares of our common stock in
the event we merge with a third party or enter into a different transaction
which requires shareholder approval.

         Key Personnel

         Our success is dependent on the performance of our senior management
and key technical personnel each of whom have extensive experience in either the
oil and gas or finance industries. The loss of our executive officers, directors
or other key employees could have an adverse effect on our business. We do not
have employment agreements in place with our senior management or key employees.
We do not currently carry key man insurance for any of our senior management or
key employees, nor do we anticipate obtaining key man insurance in the
foreseeable future.

Risk Factors Relating to our Industry

         Exploration and Development Risks

         Our success is dependent on finding, developing and producing economic
quantities of oil and gas. We make use of the best information available to us
and employ current technologies and consultants to attempt to mitigate risks.
However, despite these efforts, we may be unsuccessful in finding economically
recoverable reserves. We are also subject to operating risks normally associated
with the exploration, development and production of oil and gas. These risks
include high pressure or irregularities in geological formations, blowouts,
fires, shortages or delays in obtaining equipment and qualified personnel,
equipment failure or accidents, and adverse weather conditions, such as winter
snowstorms. These risks can result in catastrophic events, or they may result in
higher costs and operating delays. We do not currently maintain insurance
coverage to compensate for these risks as such coverage is either not available
or is not considered to be cost-effective.

                                       14
<PAGE>

         Oil and Gas Reserve Risks

         There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves and projecting future rates of production and timing
of development expenditures. Changes in prices and cost levels, as well as the
timing of future development costs, may cause actual results to vary
significantly from the projected ones. The economic success of our properties is
dependent on proving existing reserves and rates of production from existing and
new wells to generate positive cash flow and provide an economic rate of return
on our investments in the fields.

         Hydrocarbons Exploration, Development and Production Industry

         Hydrocarbons exploration and development is a speculative business
characterized by a number of significant uncertainties. The marketability of
hydrocarbons acquired or discovered by us may be affected by numerous factors
that are beyond our control and that cannot be accurately predicted, such as
market fluctuations, the proximity and capacity of exploration and production
facilities, hydrocarbons markets and processing equipment, and other factors
such as government regulations, including regulations relating to royalties,
allowable production, importing and exporting of hydrocarbons, and environmental
protection, a combination of which factors may result in us not receiving an
adequate return on invested capital.

         Hydrocarbons Price Fluctuations

         Our future success is dependent on being able to transport and market
our production either within Kazakhstan or preferably through export to
international markets. The market price of hydrocarbons is volatile and beyond
our control and may adversely affect the feasibility or future profitability of
potential projects. The decision to put a field into production and the
commitment of the funds necessary for that purpose must be made long before the
first revenues from production will be received. Hydrocarbons price fluctuations
as well as forecast production costs between the time that such decision is made
and the commencement of production can completely change the economics of any
field.

         Although it is possible to protect against hydrocarbons price
fluctuations by hedging in certain circumstances, the volatility of hydrocarbons
prices represents a substantial risk in the exploration and production industry
generally, which no amount of planning or technical expertise can eliminate.

         If we are successful in establishing meaningful quantities of oil and
gas production, the prices we receive for our oil production will have a
significant impact on our future financial position and results.

                                       15
<PAGE>

Risks of Doing Business in Kazakhstan

         We believe that the present policies of the government of the ROK are
favorable to foreign investment and to exploration and production and are not
aware of any impending changes. While there is a certain amount of bureaucratic
"red tape" we have significant experience working in Kazakhstan, and good
relationships with government agencies at many levels.

         We, however, remain subject to all the risks inherent in international
operations, including adverse governmental actions, political risks, and
expropriation of assets, loss of revenues and the risk of civil unrest or war.
Our primary oil and gas property is located in Kazakhstan, which until 1990 was
part of the Soviet Union. Kazakhstan retains many of the laws and customs from
the former Soviet Union, but has developed and is continuing to develop its own
legal, regulatory and financial systems. As the political and regulatory
environment changes, we may face uncertainty about the interpretation of our
agreements and in the event of dispute, may have limited recourse within the
legal and political system.

         If we are successful in establishing commercial production from our
properties, an application will be made for an exploration and production
contract. We have the exclusive right to negotiate this contract for the ADE
Block and extended territory, and the government is required to conduct these
negotiations under the Law of Petroleum. Such contracts are customarily awarded
upon determination that the field is capable of commercial rates of production
and that the applicant has complied with the other terms of its license and
exploration contract. The terms of the exploration and production contract will
establish the royalty and other payments due to the government in connection
with commercial production. At the time the commercial production contract is
issued, we will be required to begin repaying the government its historical
investment costs of exploration and development of the ADE Block and the
Extended Territory. The obligation associated with the ADE Block is
approximately $6 million. The obligation we will be required to assume in
connection with the Extended Territory has not yet been determined and is
currently being negotiated. If satisfactory terms for commercial production
rights cannot be negotiated, it could have a material adverse effect on our
financial position.

         Environmental Risks

         The exploration and development of our projects are subject to Kazakh
laws and regulations concerning environmental matters and the discharge of
hazardous wastes and materials. We have and intend to continue to conduct our
activities in compliance with international environmental and occupational
health and safety norms, even if they exceed the currently applicable Kazakh
requirements.

         Future environmental laws and regulations could impose increased
capital or operating costs on us and could restrict and/or delay the development
or operation of our projects.

                                       16
<PAGE>

         As the holder of rights to oil and gas properties, we are subject to
various federal, states, local and foreign laws and regulations relating to
discharge of materials into, and protection of, the environment. These laws and
regulations may impose liability on us for the cost of pollution cleanup
resulting from operations and could subject us to liability for pollution
damages.

Employees

         At the time of this filing, we had 133 full-time employees. We believe
that our relationships with our employees are good. None of our employees are
covered by a collective bargaining agreement. From time to time we utilize the
services of independent consultants and contractors to perform various
professional services. Field and on-site production operation services, such as
pumping, maintenance, dispatching, inspection and testing are generally provided
by independent contractors.

Executive Offices

         Our principal executive and corporate offices are located in an office
building located at 20A Kazibek Bi Street, in Almaty, Kakzakhstan. We lease this
space and believe it is sufficient to meet our needs for the foreseeable future.

         During our fourth fiscal quarter we decided to close our New York
office. We are currently in the process of finalizing that closure and hope to
sublease this office space for the remaining term of the lease.

Reports to Security holders

         We file Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB, Current Reports on Form 8-K and other items with the Securities and
Exchange Commission (SEC). We provide free access to all of these SEC filings,
as soon as reasonably practicable after filing, on our Internet web site located
at www.bmbmunai.com. In addition, the public may read and copy any documents we
file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW,
Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
its Internet site www.sec.gov, which contains reports, proxy and information
statements and other information regarding issuers like BMB Munai.

Item 3. Legal Proceedings.

         In December 2003, a complaint was filed in the 15th Judicial Court in
and for Palm Beach County, Florida, naming, among others, us, Georges Benarroch
and Alexandre Agaian, current or former BMB directors, as defendants. The
plaintiffs, Brian Savage, Thomas Sinclair and Sokol Holdings, Inc., allege
claims of breach of contract, unjust enrichment, breach of fiduciary duty,
conversion and violation of a Florida trade secret statute in connection with a

                                       17
<PAGE>

business plan for the development Aksaz, Dolinnoe and Emir oil and gas fields
owned by Emir Oil, LLC. The plaintiffs seek unspecified compensatory and
exemplary damages.

         We will vigorously defend ourselves in this action and challenge the
merit of each claim alleged by plaintiffs. We have retained the law firm of
Gunster, Yoakley & Stewart, P.A., located in Fort Lauderdale, Florida to
represent the defendants in connection with this litigation. We have filed
motions to dismiss the plaintiffs' complaint on jurisdictional grounds. The
motions were scheduled for hearing in late August 2004, however, that hearing
has been stayed by stipulation of the parties to allow the parties to conduct
jurisdictional discovery. The hearing has not yet been rescheduled by the
parties. No discovery on the merits of the claims has begun and no trial date
has been set by the court.

         Based on the same set of facts alleged in the Florida case, in April
2005, Sokol Holdings, Inc., also filed a complaint in United States District
Court, Southern District of New York alleging that the Company, Boris
Cherdabayev, Alexandre Agaian, Bakhytbek Baiseitov, Mirgali Kunayev and Georges
Benarroch, wrongfully induced Toleush Tolmakov to breach a contract under which
Tolmakov had agreed to sell to Sokol 70% of his 90% interest in Emir Oil LLP. In
the complaint, Sokol seeks damages in an unspecified amount exceeding $75,000 to
be determined at trial, punitive damages, specific performance in the form of an
order compelling BMB to relinquish its interest in Emir and the underlying
interest in the ADE fields to Sokol and such other relief as the court finds
just and reasonable.

         We have retained the law firm of Bracewell & Giuliani located in New
York, New York to represent us in the lawsuit. We intend to answer the complaint
and to vigorously defend ourselves on jurisdictional grounds and on the merits.
The plaintiff has not named Tolmakov as a defendant in the action nor has the
plaintiff ever brought claims against Tolmakov to establish the existence or
breach of any legally binding agreement between the plaintiff and Tolmakov. A
scheduling conference has been set for August 12, 2005.

         In the opinion of management, the resolution of this lawsuit will not
have a material adverse effect on our financial condition, results of operations
or cash flows.

         Other than the foregoing, to the knowledge of management, there is no
other material litigation or governmental agency proceeding pending or
threatened against the Company or our management.

                                       18
<PAGE>

Item 4. Submission of Matters to a Vote of Security Holders

         No matters were submitted to a vote of security holders during the
quarter ended March 31, 2005.

                                     PART II

Item 5. Market Price of and Dividends on Registrants Common Equity and Other
Shareholder Matters.

         Our shares are currently traded on the Over-the-Counter Bulletin Board
("OTCBB") under the symbol BMBM. As of June 2, 2005, we had approximately 375
shareholders of record holding 31,958,846 common shares. Of the issued and
outstanding common stock, approximately 2,937,886 are free trading, the balance
are "restricted securities" as that term is defined in Rule 144 promulgated by
the Securities and Exchange Commission.

         The published high and low bid quotations from April 1, 2003 through
March 31, 2005, were furnished to us by Pink Sheets, LLC, are included in the
chart below. These quotations represent prices between dealers and do not
include retail markup, markdown or commissions and may not represent actual
transactions.

                                                         High          Low
                                                         ----          ---
Fiscal year ending March 31, 2005
---------------------------------
First Quarter                                           $5.75         $3.80
Second Quarter                                           7.65          3.00
Third Quarter                                            7.05          3.00
Fourth Quarter                                           5.40          4.60

Fiscal year ending March 31, 2004
---------------------------------
First Quarter                                           $0.31         $0.15
Second Quarter                                           1.20          0.31
Third Quarter (Oct 1 thru Dec 11)                        1.90          0.60
Third Quarter (Dec. 12 thru Dec. 31,
  after 1 share for 10 reverse split)                    7.00          1.05

Fourth Quarter                                           8.00          1.75

Cash Dividends

         During the fiscal year ended March 31, 2005, the Company did not pay,
nor declared, any dividends. The Company's ability to pay dividends is subject
to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to
the extent that the corporation's assets exceed it liabilities and it is able to
pay its debts as they become due in the usual course of business. The Board of
Directors does not, however, anticipate paying any dividends in the foreseeable

                                       19
<PAGE>

future; it intends to retain the earnings that could be distributed, if any, for
the operations, expansion and development of its business.

Securities for Issuance Under Equity Compensation Plans

         As of June 12, 2005, shares of our common stock were subject to
issuance upon the exercise of outstanding options or warrants as set forth
below.
<TABLE>
------------------------ ------------------------- ------------------------ ---------------------------------
Plan category            Number of securities      Weighted-average         Number of securities
                         to be issued  upon        exercise price of        remaining available for future
                         exercise of               outstanding              issuance under equity
                         outstanding options,      options, warrants        compensation plans
                         warrants and rights       and rights               (excluding securities reflected
                                                                            in columns (a))
                                    (a)                      (b)                         (c)
------------------------ ------------------------- ------------------------ ---------------------------------
<S>                               <C>                       <C>                       <C>
Equity compensation
plans approved by
security holders                   60,000                  $4.00                      4,940,000
------------------------ ------------------------- ------------------------ ---------------------------------
Equity compensation
plans not approved by
security holders                  810,321                   $4.05                            -0-
------------------------ ------------------------- ------------------------ ---------------------------------

Total                             870,321                   $4.04                     4,940,000
------------------------ ------------------------- ------------------------ ---------------------------------
</TABLE>

         In October 2004, we agreed to grant stock options under our 2004 Stock
Incentive Plan to Gary Lerner, our corporate Secretary, to purchase 60,000
shares of our common stock. The options have an exercise price of $4.00 per
share and expire in October 2009.

         On November 19, 2003, we granted an option to Credifinance Securities
Limited for services rendered by Credifinance as our agent in connection with
private placements made by us in November 2003. Georges Benarroch, a Company
director is also the CEO of Credifinance and may be deemed to be a related
party. The option grants Credifinance the right to purchase up to 142,857 shares
of our common stock at an exercise price of $3.50 per share. The option expires
on November 26, 2008. The option provides for adjustments to the number of
shares and/or the price per share to protect the holder against dilution and in
the event of mergers, reorganizations and similar events. The option also
requires that in the event we determine to make a registered public offering
during the term of the option, we shall use our best efforts to include the
common shares underlying the options in the registration statement.

                                       20
<PAGE>

         In December 2003, we granted Credifinance agent warrants in connection
with funds raised on our behalf. The agent warrants grant Credifinance the right
to purchase up to 275,050 shares of our common stock at an exercise price of
$2.15 and 208,000 shares of our common stock at an exercise price of $2.50 per
share. The warrants provide for adjustments to the number of shares and/or the
price per share to protect the holder against dilution and in the event of
mergers, reorganizations and similar events. In May and June 2005, Credifinance
exercised its warrants to purchase 275,050 common shares for $2.15 per share and
109,030 common shares for $2.50 per share.

         In connection with a private offering of our common stock conducted
during the second fiscal quarter, we issued placement agent warrants to
Credifinance and Aton Securities, Inc., at various times from July 2004 to
September 2004. The placement agent warrants grant Credifinance the right to
purchase up to 148,980 shares of our common stock and Aton Securities the right
to purchase up to 309,454 shares of our common stock. The options are
exercisable at price of $4.00 per share and expire at various times from January
31, 2006 to March 19, 2006. The agent warrants provide for adjustments to the
number of shares and/or the price per share to protect the holder against
dilution in the event of mergers, reorganizations and similar events.

         Subsequent to the end of our fiscal year, in April 2005 we issued
Credifinance and Aton Securities placement agent warrants in connection with
funds raised on our behalf during the quarter ended March 31, 2005. The
placement agent warrants grant Credifinance the right to purchase 50,100 shares
of our common stock and Aton Securities the right to purchase 60,000 shares of
our common stock. The warrants issued to Credifinance and Aton Securities are
exercisable at a price of $5.00 per share. The warrants expire on April 11,
2006. The option provides for adjustments to the number of shares and/or the
price per share to protect the holder against dilution and in the event of
mergers, reorganizations and similar events.

Recent Sales of Unregistered Securities.

         During the quarter ended March 31, 2005 the following equity
securities, which were not registered under the Securities Act of 1933, were
issued.

         During and subsequent to the quarter end, we issued 3,101,000
restricted common shares to investors for $5.00 per share, raising gross
proceeds of $15,505,000 in a private placement. The shares were issued without
registration under the Securities Act of 1933 in reliance upon exemptions from
registration pursuant to Rule 506 of Regulation D and Regulations S of the rules
and regulations promulgated by the Securities and Exchange Commission under the
Securities Act of 1933.

         As discussed above, at the closing of the recent private placement we
granted placement agent warrants to Aton Securities and Credifinance, a related
company through a common director, in the amounts of 60,000 and 50,100

                                       21
<PAGE>

respectively, to purchase shares of our common stock at $5.00 per share. These
warrants are immediately exercisable and expire on April 11, 2006. The warrants
were issued without registration under the Securities Act of 1933 in reliance
upon an exemption from registration pursuant to Section 4(2) of the Securities
Act of 1933.

         In May and June 2005, Credifinance exercised warrants granted in
December 2003 to purchase 275,050 common shares for $2.15 per share and 109,030
common shares for $2.50 per share, for an aggregate purchase price of $863,932.
The shares were issued without registration pursuant to Regulation S of the
rules and regulations promulgated by the Securities and Exchange Commission
under the Securities Act of 1933.

Item 6. Management's Discussion and Analysis of Results of Operations

         The following discussion is intended to assist you in understanding our
results of operations and our present financial condition. Our Consolidated
Financial Statements and the accompanying notes included elsewhere in this Form
10-KSB contain additional information that should be referred to when reviewing
this material.

         Statements in this discussion may be forward-looking. These
forward-looking statements involve risks and uncertainties, including those
discussed below, which could cause actual results to differ from those
expressed. Please read Forward-Looking Information on page 3.

Overview

         We operate in one segment, natural gas and oil exploration and
development. We hold a contract that currently allows us to explore and develop
approximately 460 square kilometers in western Kazakhstan. Our contract includes
the ADE Block and the Extended Territory, which are collectively referred to
herein as "our properties."

         Under our contract we are permitted to explore for oil and natural gas
within our properties. Our contract also grants us the right to sell the oil and
natural gas recovered during test production to generate revenue. We have been
engaged in test production and selling of crude oil since May 2004. Under the
terms of our contract, we are required to sell the oil and gas we produce in the
Kazakhstan domestic market until we apply for and are granted permission to
export our production. The average price per barrel of crude oil in the
Kazakhstan domestic market during the past twelve months has been approximately
$15 per barrel, significantly lower than the world market price. For most of
fiscal 2005, we lacked sufficient storage capacity to accumulate adequate
volumes of oil for exportation. With the completion of additional storage
capacity at the facility, we now have the capability to export oil for sale in
the world markets. We will apply for permission from the government to begin
exporting our production for sale in the world markets. We anticipate realizing
greater revenue per barrel once we begin exporting oil to the international
world markets.

                                       22
<PAGE>

         During the fiscal year ended March 31, 2005 we generated revenue of
$973,646. We did not generate any revenue during the period from inception (May
6, 2003) through March 31, 2004 because we did not begin test production until
May 2004. For the year ended March 31, 2005 crude oil accounted for 100% of our
production and revenues.

         We invested approximately $17,411,861 in cash in exploration and
development of our properties during the fiscal year ended March 31, 2005. Our
budget for exploration and development of our properties for the upcoming fiscal
year is approximately $10 million to $14 million.

         We have and will continue to seek to increase our proven reserves
through continued exploration of our properties, as well as the acquisition of
other properties with exploration and production potential.

         For us to operate profitability and grow in the future we need to
obtain additional capital either through additional fund raising or through
significantly increased production. Our revenue, profitability and future growth
depend substantially on factors beyond our control, such as economic, political
and potential regulatory and competition from other sources of energy. Oil and
natural gas prices historically have been volatile and may fluctuate widely in
the future. Sustained periods of low prices for oil or natural gas could
materially and adversely affect our financial position, results of operations,
the quantities of oil and natural gas reserves that we can economically produce,
the markets into which we can sale our oil and our access to additional capital.
In a worst case scenario, future drilling operations could be largely
unsuccessful, oil and gas prices could sharply decline, we could fail to gain
access to the world oil markets and/or other factors beyond our control could
cause us to modify or substantially curtail our exploration and development
plans, which could negatively impact our earnings, cash flow and most likely the
trading price of our securities.

Results of Operations

         The following table sets forth selected operating data for the periods
indicated:
<TABLE>
<CAPTION>
                                                                             For the period from inception
                                                For the year ended               (May 6, 2003) through
                                                  March 31, 2005                     March 31, 2004
                                           -----------------------------    ---------------------------------
<S>                                               <C>                                 <C>
Revenues:
   Oil and gas sales                              $     973,646                                 -

Expenses:
   Oil and gas operating(1)                             197,697                                 -
   Production                                           265,149                                 -
   Selling                                              206,929                                 -
   Depreciation, depletion and
      Amortization                                      133,903                             4,758
   General and administrative                         4,060,962                           781,757

                                       23
<PAGE>

Net Production Data:
   Oil (Bbls)                                            68,755                                 -
   Natural gas (Mcf)                                          -                                 -
   Barrels of oil equivalent (BOE)                            -                                 -

Average Sales Price:
   Oil (per Bbl)                                          15.17                                 -
   Natural gas (per Mcf)                                      -                                 -
   Equivalent price (per BOE)                                 -                                 -

Expenses ($ per BOE):
   Oil and gas operating(1)                                3.08                                 -
   Depreciation, depletion and
     amortization(2)                                       1.05                                 -
------------------
</TABLE>
(1)      Includes lease operating costs and production and ad valorem taxes.
(2)      Represents depreciation, depletion and amortization of oil and gas
         properties only.

         Year ended March 31, 2005 compared to the period from inception (May 6,
2003) through March 31, 2004

Revenue and Production

         The following table summarizes production volumes, average sales prices
and operating revenue for our oil and natural gas operations for the year ended
March 31, 2005 and the period from inception (May 6, 2003) to March 31, 2004.
<TABLE>
<CAPTION>
                                                                                        Fiscal 2005 Compared to the
                                                                                           Period from inception
                                                                                           (May 6, 2003) through
                                                                                                March 31, 2004
                                                                    For the Period     -----------------------------
                                             For the Fiscal         from Inception          $               %
                                               Year ended               Through         Increase         Increase
                                             March 31, 2005         March 31, 2004     (Decrease)       (Decrease)
                                            ------------------    -------------------- ------------    -------------
<S>                                                  <C>                       <C>        <C>                <C>
Production volumes:
  Natural gas (Mcf)                                         -                       -            -                -
  Natural gas liquids (Bbls)                                -                       -            -                -
  Oil and condensate (Bbls)                            68,755                       -       68,755              N/A
  Barrels of oil equivalent (BOE)                           -                       -            -                -

Average Sales Price
  Natural gas ($ per Mcf)                            $      -                  $    -     $      -           $    -
  Natural gas liquids ($ per Bbl)                    $      -                  $    -     $      -           $    -
  Oil and condensate ($ per Bbl)                     $  15.17                  $    -          N/A              N/A
  Barrels of oil equivalent ($ per BOE)                     -                  $    -     $      -           $    -

Operating Revenue:
Natural gas                                          $      -                  $    -            -           $    -
Natural gas liquids                                  $      -                  $    -            -           $    -
Oil and condensate                                   $973,646                  $    -     $973,646              N/A
Gain on hedging and derivatives(1)                   $      -                  $    -     $      -           $    -
                                            ------------------    -------------------- ------------    -------------
      Total                                          $973,646                  $    -     $973,646           $    -
                                            ==================    ==================== ============    =============
</TABLE>
                                       24
<PAGE>

(1)      We did not engage in hedging transactions, including derivatives during
         the fiscal year ended March 31, 2005, or the period from inception to
         March 31, 2004.

         Revenues. We generate revenue under our contract from the sale of oil
and natural gas recovered during test production. During the year ended March
31, 2005, we realized revenue from oil and gas sales of $973,646 compared to $0
during the year ended March 31, 2004. This increase in revenues in the 2005
fiscal year is primarily the result of the fact that in the period from
inception through March 31, 2004, we were just beginning operations and seeking
to acquire rights to oil and gas properties and we had no oil and gas sales
during that period. We anticipate revenues will continue to increase in the
upcoming fiscal year. At the present time, however, it is unclear the rate at
which our production and corresponding revenues may increase.

         Our revenue is sensitive to changes in prices received for our
products. Our production is sold at the prevailing market price in Kazakhstan,
which fluctuates in response to many factors that are outside our control.
Imbalances in the supply and demand for oil can have a dramatic effect on the
prices we receive for our production. Political instability, the economy,
weather and other factors outside our control could impact supply and demand.

Costs and Operating Expenses

         Production Expenses. During the fiscal year ended March 31, 2005, we
incurred $265,149 in production expenses. We had no similar expense during the
period from May 6, 2003, to March 31, 2004 because we were not engaged in oil
and gas production during the prior period. We expect production expenses to
continue to increase in the upcoming fiscal year. At the present time, however,
it is unclear the rate at which our production expenses may increase in the
upcoming fiscal year.

         Selling Expenses. We incurred selling expenses of $206,929 during the
fiscal year ended March 31, 2005 compared to $0 during the period from inception
through March 31, 2004. We did not incur selling expenses in the prior year
period because we did not engage in the sale of oil or gas during that period.

         General and Administrative Expenses. General and administrative
expenses during the fiscal year ended March 31, 2005 were $4,060,962 compared to
$781,757 during the period from inception on May 6, 2003 through March 31, 2004.
This represents a 419% increase in general and administrative expenses. This
significant increase is attributable to a 208% increase in payroll and other
compensation, a 284% increase in professional fees, a 781% increase in business
trip expenses, a 359% increase in taxes, a 2,049% increase in rent, a 992%
increase in transportation, a 5,016% increase in insurance expense, a 2,152%
increase in communication expenses and a 979% increase in other expenses. During
the 2005 fiscal year we accrued a $250,000 obligation required under our work
program to contribute to the Astana Fund, a government fund used to fund
construction and development Astana, Kazakhstan - the capital of Kazakhstan.

                                       25
<PAGE>

This was a one-time obligation. This amount was paid by us subsequent to our
fiscal year end. Additionally, we established bad debt reserves in the amount of
$129,051 on advances for inventory purchases during the fiscal year ended March
31, 2005. The significant increase in general and administrative expenses is
largely the result of hiring more personnel to operate our business, using
services of technicians, engineers, accountants and lawyers, as well as
incurring other general corporate expenses. We anticipate general and
administrative expenses will increase in the upcoming fiscal year. However, we
do not expect general and administrative expenses to increase at such a
significant rate in the upcoming year. We anticipate increases in revenue,
operating costs and selling costs will outpace the increase in general and
administrative expenses in the upcoming year.

         In April 2005 we elected to relocate our U.S. offices to Salt Lake
City. Consequently we plan to sublease our office space in New York City to
another company. We also reduced the number of employees we have in our U.S.
office. We believe these measures will reduce our rent, taxes and other relevant
expenses in the upcoming fiscal year.

         Loss from Operations. As a result of significantly increasing expenses,
which were only partially offset by revenue from oil and gas sales, during the
fiscal year ended March 31, 2005 we realized a loss from operations of
$3,625,845 compared to a net loss from operations of $786,515 during the period
from May 6, 2003 to March 31, 2004. Until such time as revenue from oil and gas
sales exceeds expenses we will continue to generate operating losses. At this
time, it is unclear when we will generate sufficient oil and gas to offset our
expenses.

         Other Income. During the fiscal year ended March 31, 2005 we realized
total other income of $501,830 compared to $254,717 for the period from May 6,
2003 to March 31, 2004. This 97% increase in other income is largely
attributable to $428,572 increase in exchange gain resulting from fluctuations
of foreign currency rates against the U.S. Dollar, a $165,699 increase in
realized gain on dealing securities and our realizing interest income of $17,799
compared to interest payments of $84,007, partially offset by a $501,174
decrease in realized and unrealized gains on marketable securities. During the
2005 fiscal year we raised approximately $27 million through the sale of our
securities in private placement transactions. Therefore, at times during the
year, we had funds that were not being used in operations that we invested in
marketable securities. We anticipate the funds held in marketable securities
will be used to fund our operations and therefore expect gains from marketable
securities, both realized and unrealized, to decrease in the next twelve months.

         Net Loss. During the fiscal year ended March 31, 2005 we realized a net
loss of $3,124,358 compared to a net loss of $613,782 for the period from
inception, May 6, 2003 through March 31, 2004. As discussed above this net loss
is largely the result of our engaging in active exploration and development
activities and operations for the entire 2005 fiscal year, whereas we were not
engaged in active operations for much of the prior fiscal period. We will
continue to realize net losses from operations until such time as revenues
generated from oil and gas production and sales and other income offset our
expenses. At this time, it is unclear when, or if, that may occur.

                                       26
<PAGE>

Liquidity and Capital Resources

         Funding for our activities has historically been provided by funds
raised through the sale of our common stock. From inception on May 6, 2003
through March 31, 2005, we have raised $37,416,034 through the sale of our
common stock and proceeds from the issuance of convertible debt. As of March 31,
2005, we had cash and cash equivalents of $9,989,632. We anticipate our capital
resources in the upcoming twelve months will likewise consist primarily of funds
raised in financing activities and revenue from the sale of oil and gas
recovered during test production.

         Our need for capital, in addition to funding our ongoing operations, is
primarily related to the exploration and development of our properties as
required under our contract, and the potential acquisition of additional oil and
gas properties. For the period from inception on May 6, 2003 through March 31,
2005, we have incurred capital expenditures of $42,964,359 for exploration,
development and acquisition activities.

Cash Flows

         During the fiscal year ended March 31, 2005 cash was primarily used to
fund exploration and development expenditures. We had a net increase in cash and
cash equivalents of $7,863,277 during the current fiscal year. See below for
additional discussion and analysis of cash flow.
<TABLE>
<CAPTION>
                                                                       Period from inception
                                               Twelve months ended    (May 6, 2003) through
                                                  March 31, 2005           March 31, 2004
                                              ---------------------- ------------------------
<S>                                                 <C>                      <C>
Net cash used in operating activities               $ (1,415,004)            $(3,445,339)
                                                    $(18,001,879)            $(6,564,180)
Net cash used in investing activities
Net cash provided by financing activities           $ 27,280,160             $12,135,874
                                              ---------------------- ------------------------

NET INCREASE IN CASH AND CASH EQUIVALENTS           $  7,863,277             $ 2,126,355
                                              ====================== ========================
</TABLE>

         Our primary source of cash has been cash flows from equity offerings.
During the fiscal year ended March 31, 2005 we realized $27,280,160 from the
sale of our common stock. We primarily used this cash to fund our capital
expenditures. At March 31, 2005 we had cash on hand of $9,989,632.

         We continually evaluate our capital needs and compare them to our
capital resources. Our budgeted capital expenditures for the upcoming 12 months
are $10 million to $14 million for exploration, development, production and
acquisitions. We expect to fund these expenditures primarily from additional
capital we will seek and cash on hand. In the event we are not successful in
raising the anticipated funds from the sale of our securities, we nevertheless

                                       27
<PAGE>

believe capital expenditures of approximately $10 million to $14 million could
be financed through cash on hand, the sale of marketable securities and revenues
from anticipated oil production. The minimum level of capital expenditures on
our properties is dictated by the contract. The amount of funds we devote to any
particular activity in excess of the minimum required capital expenditures may
increase or decrease significantly depending on available opportunities, cash
flows and development results, among others.

         If we are not successful in obtaining funding, we anticipate that we
will instead seek to develop existing wells and infrastructure in hopes of
generating sufficient revenue to finance our operations. This development would
be funded by cash and cash equivalents and the sale of marketable securities we
currently hold. If the funding is limited to these sources, our anticipated
development activities would be significantly more limited than anticipated
under our present business plan.

         As discussed in Note 2 to the Consolidated Financial Statements, we
hold marketable securities consisting of short-term repurchase agreements for
securities issued by Kazakhstan banks and Kazakhstan financial institutions.
Additionally, certain operating cash flows are denominated in local currency and
are translated into U.S. dollars at the exchange rate in effect at the time of
the transaction. As more fully disclosed in the "Risks of Doing Business in
Kazakhstan" section of the "Description of Business," because of the potential
for civil unrest, war and asset expropriation, some or all of these matters,
which impact operating cash flow, may affect our ability to meet our short-term
cash needs.

Contractual Obligations and Contingencies

         The following table lists our significant commitments at March 31,
2005, excluding current liabilities as listed on our consolidated balance sheet:
<TABLE>
<CAPTION>
                                                                       Payments Due By Period
                                              --------------------------------------------------------------------------
Contractual obligations                           Total        Less than 1     1-3 years       4-5 years      After 5
                                                                  year                                         years
                                              --------------- -------------- --------------- -------------- ------------
<S>                                              <C>             <C>            <C>              <C>           <C>
Capital Expenditure                              $19,800,000     $9,300,000     $10,500,000              -            -
   Commitment(1)
Due to the Government of
   the Republic of Kazakhstan(2)(3)              $ 5,994,200              -     $ 5,994,200              -            -
Due to Reservoir Consultants                     $   500,000     $  278,000     $   222,000              -            -
Liquidation Fund                                 $    60,973              -               -              -      $60,973
</TABLE>
------------------
(1)      Under the terms of our contract with the ROK, we are required to spend
         a total of at least $19.8 million dollars in exploration, development
         and improvements within the ADE Block, as extended during the term of
         the license, including $9.3 million in the 2005 calendar year, $6
         million in the 2006 calendar year and $4.5 million in the 2007 calendar
         year. If we fail to do so, we may be subject to the loss of our
         exploration license.
(2)      In connection with our acquisition of the oil and gas contract covering
         the ADE Block, we are required to repay the ROK for historical costs
         incurred by it in undertaking geological and geophysical studies and
         infrastructure improvements. The repayment terms of this obligation
         will not be determined until such time as we apply for and are granted
         commercial production rights by the ROK. Under our contract, if we wish

                                       28
<PAGE>

         to commence commercial production, we must apply for such right prior
         to the expiration of our exploration and development rights in June
         2007. We are legally entitled to receive commercial production rights
         and have the exclusive right to negotiate such with the ROK, and the
         ROK is required to conduct the negotiations under the Law of Petroleum
         in Kazakhstan. Although we can apply for commercial production rights
         at any time, we enjoy certain benefits under our contract that
         currently make it more economically advantageous for us to continue
         exploration and development activities at this time. We anticipate that
         we will apply for commercial production rights sometime during the
         first half of the 2007 calendar year. Should we decide not to pursue a
         commercial production contract, we can relinquish the ADE Block to the
         ROK in satisfaction of this obligation.
(3)      As with the ADE Block, we will also be required to repay the ROK its
         historical costs for access to and use of geological and geophysical
         data gathered and infrastructure improvement previously made by the ROK
         within the Extended Territory. We are presently negotiating the amount
         and terms of this obligation with the ROK. This approximately $6
         million obligation represents only our repayment obligation with
         respect to the ADE Block, and not the extended territory.

Off-Balance Sheet Financing Arrangements

         As of March 31, 2005, we had no off-balance sheet financing
arrangements.

Critical Accounting Policies

         We have identified the policies below as critical to our business
operations and the understanding of our financial statements. The impact of
these policies and associated risks are discussed throughout Management's
Discussion and Analysis and Plan of Operations where such policies affect our
reported and expected financial results. A complete discussion of our accounting
policies in included in Note 2 of the Notes to Consolidated Financial
Statements.

         Development Stage

         We are a development stage company and have not yet commenced our
primary revenue generating activities, which is the commercial production and
sale of oil and natural gas. Our ability to realize the carrying value of our
assets is dependent on being able to produce and sell oil from our properties.
Our Consolidated Financial Statements have been presented on the basis that we
are a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. We have
accumulated losses totaling $3,738,140 and have incurred some amount of debt in
the development phase of our operations. To fully develop our properties and
achieve positive cash flow, we will require additional funding. The Consolidated
Financial Statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities which might be necessary should we be unable to
continue in existence.

                                       29
<PAGE>

         Foreign Exchange Transactions

         Transactions denominated in foreign currencies are reported at the
rates of exchange prevailing at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated to U.S. dollar at
the rates of exchange prevailing at the balance sheet dates. Any gains or losses
arising from a change in exchange rates subsequent to the date of the
transaction are included as an exchange gain or loss in the Consolidated
Statements of Income.

         Full Cost Method of Accounting

         We follow the full cost method of accounting for our costs of
acquisition, exploration and development of oil and gas properties.

         Under full cost accounting rules, the net capitalized costs of
evaluated oil and gas properties shall not exceed an amount equal to the present
value of future net cash flows from estimated production of proved oil and gas
reserves, based on current economic and operating conditions, including the use
of oil and gas prices as of the end of each quarter.

         Given the volatility of oil and gas prices, it is reasonably possible
that the estimate of discounted future net cash flows from proved oil and gas
reserves could change. If oil and gas prices decline, even if only for a short
period of time, it is possible that impairments of oil and gas properties could
occur. In addition, it is reasonably possible that impairments could occur if
costs are incurred in excess of any increases in the cost ceiling, revisions to
proved oil and gas reserves occur, or if properties are sold for proceeds less
than the discounted present value of the related proved oil and gas reserves.

Recently Issued Accounting Pronouncements

         In June 2004, the FASB issued an exposure draft of a proposed
statement, "Fair Value Measurements" to provide guidance on how to measure the
fair value of financial and non-financial assets and liabilities when required
by other authoritative accounting pronouncements. The proposed statement
attempts to address concerns about the ability to develop reliable estimates of
fair value and inconsistencies in fair value guidance provided by current U.S.
GAAP, by creating a framework that clarifies the fair value objective and its
application in GAAP. In addition, the proposal expands disclosures required
about the use of fair value to re-measure assets and liabilities. The standard
would be effective for financial statements issued for fiscal years beginning
after June 15, 2005. We are reviewing The Exposure Draft to determine the
potential impact, if any, on our Consolidated Financial Statements.

         In November 2004, the EITF ratified Issue No. 03-13, "Applying the
Conditions in Paragraph 42 of FASB Statement No.144, Accounting for the
Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report
Discontinued Operations." The EITF reached a consensus that classification of a
disposed of or held-for-sale component as a discontinued operation is only
appropriate if the ongoing entity (i) expects to have no continuing "direct"
cash flows, and (ii) does not retain or expect to retain an interest, contract

                                       30
<PAGE>

or other arrangement sufficient to enable it to exert significant influence over
the disposed component's operating and financial policies after the disposal
transaction. Application of this consensus did not have a material impact on our
Consolidated Financial Statements.

         In December 2004, the FASB issued Statement 153, "Exchanges of
Non-monetary Assets," an amendment of APB Opinion 29, Accounting for
Non-monetary Transactions. This amendment eliminates the exception for
non-monetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of non-monetary assets that do not have
commercial substance. Under Statement 153, if a non-monetary exchange of similar
productive assets meets a commercial-substance criterion and fair value is
determinable, the transaction must be accounted for at fair value resulting in
recognition of any gain or loss. This statement is effective for non-monetary
transactions in fiscal periods that begin after June 15, 2005 and will not
impact our financial position or results of operations, and cash flows.

         In December 2004, the FASB issued a revision of SFAS No. 123
"Share-Based Payment" (No. 123R). The statement establishes standards for the
accounting for transactions in which an entity exchanges its equity investments
for goods and services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. The statement does not change the accounting guidance
for share-based payments with parties other than employees. The statement
requires a public entity to measure the cost of employee service received in
exchange for an award of equity instruments based on the grant-date fair value
of the award (with limited exception). That cost will be recognized over the
period during which an employee is required to provide service in exchange for
the award (usually the vesting period). A public entity will initially measure
the cost of employee services received in exchange for an award of a liability
instrument based on its current fair value; the fair value of that award will be
remeasured subsequently at each reporting date through the settlement date.
Changes in fair value during the requisite service period will be recognized as
compensation over that period. The grant-date for fair value of employee share
options and similar instruments will be estimated using option-pricing models
adjusted for the unique characteristics of these instruments. We will be
required to comply with this pronouncement for periods beginning after December
15, 2005.

Effects of Inflation and Pricing

         The oil and natural gas industry is very cyclical and the demand for
goods and services of oil field companies, suppliers and others associated with
the industry puts extreme pressure on the economic stability and pricing
structure within the industry. Typically, as prices for oil and natural gas
increase, so do all associated costs. Material changes in prices impact the
current revenue stream, estimates of future reserves, borrowing base
calculations of bank loans and value of properties in purchase and sale
transactions. Material changes in prices can impact the value of oil and natural
gas companies and their ability to raise capital, borrow money and retain

                                       31
<PAGE>

personnel. While we do not currently expect business costs to materially
increase, continued high prices for oil and natural gas could result in
increases in the cost of material, services and personnel.

Item 7. Financial Statements

         See Consolidated Financial Statement listed in the accompanying index
to the Consolidated Financial Statements on Page F-1 herein.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

         None.

Item 8A. Controls and Procedures

         Our chief executive officer and our chief financial officer (the
"Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rule 13a-15 and
Rule 15d-15(e)). Such officers have concluded (based upon their evaluations of
these controls and procedures as of the end of the period covered by this
report) that our disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in this report is accumulated and
communicated to management, including the Certifying Officers as appropriate, to
allow timely decisions regarding required disclosure.

         The Certifying Officers have also indicated that there were no
significant changes in our internal controls over financial reporting or other
factors that could significantly affect such controls subsequent to the date of
their evaluation, and there were no significant deficiencies and material
weaknesses.

Item 8B. Other Information

         Subsequent to our decision to close our New York office in February
2005 Mr. Agaian informed the board of directors in April 2005 that he intended
to resign as an officer and director of the Company. Mr. Agaian did not,
however, tender his resignation at that time. We have been negotiating the terms
of a separation agreement with Mr. Agaian. Although we have not concluded
negotiations of the final terms of the separation agreement, Mr. Agaian tendered
his resignation as a director, co-chief executive officer and president of the
Company on July 13, 2005. We anticipate the final terms of a separation
agreement with Mr. Agaian will be reached in the near future.

         Mr. Agaian's resignation was not the result of any disagreement with
the Company on any matter relating to our operations, policies or procedures.

         Our board of directors has approved the appointment of Boris
Cherdabayev, to serve as chief executive officer and president of the Company to
fill the vacancies created by Mr. Agaian's resignation.

                                       32
<PAGE>

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons.

         The following table sets forth our directors, executive officers,
promoters and control persons, their ages, and all offices and positions held
within the Company. Directors are elected for a period of one year and
thereafter serve until their successor is duly elected by the stockholders and
qualified. Officers and other employees serve at the will of the Board of
Directors.

Name                  Age         Positions with BMB              Director Since
----                  ---         ------------------              --------------

Boris Cherdabayev     51    Chairman of the Board of Directors     November 2003
                            President and Chief Executive Officer
Bakhytbek Baiseitov   47    Director                               November 2003
Georges Benarroch     57    Director                               November 2003
Anuar Kulmagambetov   53    Chief Financial Officer
Gary Lerner           41    Secretary
Troy Nilson           40    Director                               December 2004
Stephen Smoot         50    Director                               January 2005
Valery Tolkachev      37    Director                               December 2003

         The above individuals will serve as our officers and/or directors. A
brief description of their background and business experience follows:

         Boris Cherdabayev. Mr. Cherdabayev joined BMB Holding, Inc., and
assumed his current positions in May 2003. From May 2000 to May 2003, Mr.
Cherdabayev served as Director at LLP TengizChevroil, a multination oil and gas
company owned by Chevron, ExxonMobil, KazMunayGas and LukOil. From 1998 to May
2000, Mr. Cherdabayev served as a member of the Board of Directors,
Vice-President of Exploration and Production and Executive Director on Services
Projects Development for at NOC "Kazakhoil", an oil and gas exploration and
production company. From 1983 to 1988, he served as a people representative at
Novouzen City Council (Kazakhstan) and from 1994 to 1998; he served as a
people's representative at Mangistau Oblast Maslikhat (regional level
legislative structure) and a Chairman of the Committee on Law and Order. For his
achievements Mr. Cherdabayev has been awarded with a national "Kurmet" order.
Mr. Cherdabayev earned an engineering degree from the Ufa Oil & Gas Institute,
with a specialization in "machinery and equipment of oil and gas fields" in
1976. Mr. Cherdabayev also earned an engineering degree from Kazakh Polytechnic
Institute, with a specialization in "mining engineer on oil and gas fields'
development." During his career he also completed an English language program in

                                       33
<PAGE>

the US, NIAI-D Program (Chevron Advanced Management Program) at Chevron
Corporation offices in San-Francisco, CA, USA, and CSEP Program (Columbia Senior
Executive Program) at Columbia University, New York, NY USA.

         Bakhytbek Baiseitov. In 1998, Mr. Baiseitov formed the first
cooperative bank in the USSR, and continues to serve as the Chairman of the
Board of the bank. The bank is now known as Bank CenterCredit. Since 1995, Mr.
Baiseitov has also served as the Chairman of the Board of Kazakhstan
International Bank. In 1989, Mr. Baiseitov was co-founder of the All-Union
Association of Commercial Banks. Since 1996, Mr. Baiseitov has also served as a
founder and president of The Banks Association of the Republic of Kazakhstan. At
the present time Mr. Baiseitov is the chairman of the central audit committee of
"Otan" (Native land) party with the social-democratic policy. Since 1999, as
board chairman of "El-Daryn" Fund, Mr. Baiseitov has actively supported
scientific, technological and social innovations in all spheres of reformation
in Kazakhstan society. Mr. Baiseitov obtained his Masters degree from the Moscow
Institute for Finance in 1979 and for two more years continued education at
Almaty Institute of National Economy, at Credit and Finance department.

         Georges Benarroch. Mr. Benarroch has been a member of the Investment
Dealer Association of Canada and has served as the president and chief executive
officer of Euro Canadian Securities Limited and its successor company,
Credifinance Securities Limited, an institutional investment bank, based in
Toronto, a member of the Toronto Stock Exchange and the Montreal Exchange since
1982. Credifinance Securities Limited has been one of the North American
pioneers in providing investment banking and equity research coverage of
companies in the FSU. Since 1994, Credifinance Securities Limited has acted as
agent and/or underwriter, stock exchange sponsor, and introducing broker for a
number of companies operating in the FSU and was instrumental in supporting
Hurricane Hydrocarbons (now PetroKazakhstan) and Transmeridian Exploration
through its early stage of development. Mr. Benarroch is also the president and
chief executive officer of Credifinance Capital Inc. based in Toronto, Canada
and Credifinance Capital Corp. based in Palm Beach, Florida, both companies
specialized in proprietary trading, private equity funding and venture capital.
Since 1994, he has also served as president and chief executive officer of
InterUnion Financial Corporation, a "business bank", which in 1996 created
InterUnion Asset Management, a Canadian money management firm with over $1.5
billion under management prior to being sold in 2001. Mr. Benarroch graduated
from the Faculte de Droit in Toulouse (France), with a B.Sc. degree from the
Universite de Montreal (Canada) in 1970. He received a M.Sc. International
Relations and Economic Development from both the Faculte de Droit de Nice
(France) and the Institut des Hautes Etudes Internationales, in 1972 and 1972
respectively. Mr. Benarroch completed a Doctorat de Droit (III cycle) at the
Universite de Paris (France) in 1974.

         Dr. Anuar Kulmagambetov. Since 1998, Dr. Kulmagambetov has served as an
assistant to the chairman of the board at Bank CenterCredit, the fourth largest
bank in Kazakhstan. While with Bank CenterCredit, Dr. Kulmagambetov provided
risk management, analysis of long-range economic trends and projections,
investment of funds and raising additional capital as required for expansion.

                                       34
<PAGE>

Dr. Kulmagambetov also currently holds the position of board chairman of the Oil
and Gas E&P Company "Bowels", which is licensed by government of the Republic of
Kazakhstan for oil and gas exploration and production of up to 22,500 km2 of
prospective territories. In 1998 Dr. Kulmagambetov moved to Almaty, Kazakhstan
as a lecturer at the International Business Academy, where he continues to teach
courses in different disciplines, such as "Corporate Finance", "International
Finances", "Mathematics for Finances." In 1969 after graduating with summa cum
laude from a special high school for physics and mathematics Dr. Kulmagambetov
continued his education at the Polytechnic Institute in Karaganda, Kazakhstan
(specialized in automated informational systems). For his success in education
he has been awarded a highest honorable grant (grant named after Lenin) and
graduated from the institute in 1974 with diploma with honor. From 1975 to 1978
Dr. Kulmagambetov continued his scientific research under his doctorate program
at the Institute for Mathematics and Mechanics of the Academy of Science of the
Republic of Kazakhstan. In 1978 he moved to Moscow to continue his work at the
Institute of Control Science.

         Troy F. Nilson, CPA. Since February 2001, Mr. Nilson has served as an
Audit Partner with Chisholm, Beirwolf & Nilson, Certified Public Accountants, in
Bountiful, Utah. From December 2000 to February 2001, he served as an Audit
Manager for Crouch, Bierwolf & Associates, Certified Public Accountants, in Salt
Lake City, Utah. Prior to that time, Mr. Nilson served as the Senior Auditor for
Intermountain Power Agency in Salt Lake City, Utah from March 1995 to December
2000. In past five years, Mr. Nilson has extensive public and private company
audit, audit review and Securities and Exchange Commission disclosure and
reporting experience. Mr. Nilson received licensure as a Certified Public
Accountant in 1997. Mr. Nilson earned a Masters of Science Degree in Business
Information Systems from Utah State University in December 1992, and a Bachelor
of Science in Accounting from Utah State University in August 1990. Mr. Nilson
is not a director or nominee of any other reporting company.

         Stephen Smoot. During the past five years Mr. Smoot has been
self-employed as a consultant in the area of foreign technology development and
transfer. Mr. Smoot assisted in forming Caspian Service Group Limited, a
wholly-owned subsidiary of EMPS Corporation, in December 1999, and served as
President of Caspian Services from inception until February 2002. Mr. Smoot
served as the Interim President of EMPS Corporation from June 2004 until
December 2004. Mr. Smoot is not a director in any other reporting company.

         Valery Tolkachev. Since 1999 Mr. Tolkachev has been employed with Aton
Investment Company in Moscow, Russia. He is currently serving as a Managing
Director of Capital Markets for Aton. From 1991 to 1999, Mr. Tolkachev served in
various positions including, broker, analyst, manager and V.P. of Equities
Department at MDM Bank, InkomBank, InkomCapital, Tveruniversalbank and TIRAbrok
Company. Mr. Tolkachev graduated with Honors from the High Military School in
Kiev, USSR in 1989. In June 2005 Mr. Tolkachev graduated from the Academy of
National Economy, Moscow Law faculty and has applied for admission to practice
law in Russia. Mr. Tolkachev serves as a director of EMPS Corporation, a U.S.
reporting company.

                                       35
<PAGE>

         Gary Lerner. Mr. Lerner is a principal in the law firm of Lerner &
Kaplan, PLLC, a law firm he co-founded in 2001. From 1998 to 2000, Mr. Lerner
practiced law as a sole practitioner. Mr. Lerner received a B.S. degree from
Polytechnic University of New York in electrical engineering and computer
science in 1984. He earned a Masters degree in computer engineering from
Syracuse University in New York in 1987. Mr. Lerner earned a Jurist Doctorate
degree from New York Law School in 1998.

Family Relationships

         There are no family relationships among our directors and/or executive
officers.

Involvement in Certain Legal Proceedings

         During the past five years none of our executive officers, directors,
promoters or control persons has been involved in any of the following events
that could be material to an evaluation of his ability or integrity, including:

         (1)      Any bankruptcy petition filed by or against any business of
                  which such person was a general partner or executive officer
                  either at the time of the bankruptcy or within two years prior
                  to that time.

         (2)      Any conviction in a criminal proceeding or being subject to a
                  pending criminal proceeding (excluding traffic violations and
                  other minor offenses);

         (3)      Being subject to any order, judgment, or decree, not
                  subsequently reversed, suspended or vacated, of any court of
                  competent jurisdiction, permanently or temporarily enjoining,
                  barring, suspending or otherwise limiting his involvement in
                  any type of business, securities or banking activities; and

         (4)      Being found by a court of competent jurisdiction (in a civil
                  action), the Commission or the Commodity Futures Trading
                  Commission to have violated a federal or state securities or
                  commodities law, and the judgment has not been reversed,
                  suspended, or vacated.

Board Committees

         Our board of directors has established an audit committee, whose
principal functions are to assist the board in monitoring the integrity of our
financial statements, the independent auditor's qualifications and independence,
the performance of our independent auditors and our compliance with legal and
regulatory requirements. The audit committee has the sole authority to retain
and terminate our independent auditors and to approve the compensation paid to
our independent auditors. The audit committee is also responsible for overseeing
our internal audit function. The audit committee is comprised of two independent

                                       36
<PAGE>

directors, consisting of Troy Nilson and Valery Tolkachev, with Mr. Nilson
acting as chairman. Our board of directors has determined that Mr. Nilson
qualifies as an "audit committee financial expert" under the rules of the SEC
adopted pursuant to the requirements of the Sarbanes-Oxley Act of 2002. Mr.
Nilson and Mr. Tolkachev each qualifies as "independent" in accordance with the
applicable regulations adopted by the SEC.

         Our board of directors has also established a compensation committee.
The principal function of the compensation committee is to make recommendations
regarding compensation of the Company's officers. The compensation of our chief
executive officer is recommended to the board (in a proceeding in which our
chief executive officer does not participate) by the compensation committee. Our
compensation committee is comprised of three independent directors consisting of
Troy Nilson, Valery Tolkachev and Stephen Smoot. Compensation for all other
officers is also recommended to the board for determination, by the compensation
committee.

         We currently do not have a nominating committee. Instead, our
independent directors fulfill the role of a nominating committee. When vacancies
occur the board will consider director nominees recommended by shareholders, as
well as director nominees recommended by a majority of the directors who are
then independent.

         Our board may establish other committees from time to time to
facilitate our management. Compliance with Section 16(a) of the Exchange Act

         Based solely on a review of Forms 3, 4 and 5 and amendments thereto
furnished to us during its most recent fiscal year, it appears that Valery
Tolkachev inadvertently failed to timely file a Form 3 at the time he was
appointed to the board of directors and Toleush Tolmakov failed to timely file a
Form 3 at the time he was issued 3,500,000 shares of our common stock to acquire
his 30% interest in Emir Oil.

Code of Ethics

         We have adopted a Code of Ethics that applies to our principal
executive, financial and accounting officers and persons performing similar
duties. The Code is designed to deter wrong-doing and promote honest and ethical
behavior, full, fair, timely, accurate and understandable disclosure and
compliance with applicable governmental laws, rules and regulations. It is also
designed to encourage prompt internal reporting of violations of the Code to an
appropriate person and provides for accountability for adherence to the Code. A
copy of our Code of Ethics has been posted on our website and may be viewed at
www.bmbmunai.com. A copy of the Code of Ethics will be provided to any person
without charge upon written request to our Assistant Secretary at our U.S.
offices, 324 South 400 West, Suite 250, Salt Lake City, Utah 84101.

                                       37
<PAGE>

Item 10. Executive Compensation.

         The following table sets forth information concerning the compensation
paid by us during the period from inception (May 6, 2003) through the end of the
2004 fiscal year and for the 2005 fiscal year to our chief executive officer,
former chief executive officer and other most highly compensated executive
officers.
<TABLE>
<CAPTION>
                                                   SUMMARY COMPENSATION TABLE

                                                                               Long Term          Compensation
                                                                                Awards               Payouts
                                          Annual Compensation             -------------------   -----------------------
                                ----------------------------------------- Restricted             LTIP
Name & Principal                                        Other Annual      Stock       Options    Payout    All Other
Position                Year    Salary      Bonus       Compensation      Awards      /SARs #      ($)     Compensation
----------------------- ------- ----------- ----------- ----------------- ----------- ---------- --------- -------------
<S>                     <C>       <C>       <C>             <C>             <C>         <C>       <C>           <C>
Alexandre Agaian        2005      $230,122  $   -0-         $  -0-           $-0-        --        $-0-         $-0-
Former CEO,             2004       168,463      -0-            -0-            -0-        --         -0-          -0-
Former President
Former Director(1)

Boris Cherdabayev       2005       200,558      -0-            -0-            -0-        --         -0-          -0-
CEO, President and      2004        10,000   105,000           -0-            -0-        --         -0-          -0-
Director

Anuar Kulmagambetov     2005       185,667     -0-             -0-            -0-        --         -0-          -0-
CFO                     2004        10,000   105,000           -0-            -0-        --         -0-          -0-

Georges Benarroch       2005           -0-      -0-          12,500           -0-        --         -0-          -0-
Director, Former        2004           -0-      -0-            -0-            -0-        --         -0-          -0-
President, Former
CEO(2)
</TABLE>
----------------------
(1)      Mr. Agaian was the president, co-chief executive officer and a director
         of the Company from November 2003 to July 2005.
(2)      Mr. Benarroch was the president and chief executive officer of
         InterUnion during the period when InterUnion was conducting no active
         operations prior to its merger with BMB Holding. Mr. Benarroch resigned
         as president and chief executive officer of the Company at the time of
         the merger.

Compensation of Directors

         Effective as of September 2004, all our outside directors are
compensated with a stipend of $25,000 per year plus $1,000 for each directors
meeting attended in person, plus airfare and hotel expense. No director receives
a salary as a director.

Employment Contracts and Termination of Employment and Change-in-Control
Arrangements

                                       38
<PAGE>

         We currently have no employment contracts with any of our named
executive officers. In the past three years no executive officer has received
any amounts in connection with his resignation, retirement, or other
termination. No executive officer received any amounts in the last three years
in connection with a change in control of the Company of a change in the
executive officer's responsibilities after a change in control.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The term "beneficial owner" refers to both the power of investment and
the right to buy and sell our shares. It also refers to rights of ownership or
the right to receive distributions from the Company and proceeds from the sale
of Company shares. Since these rights may be held or shared by more than one
person, each person who has a beneficial ownership interest in shares is deemed
to be the beneficial owners of the same shares because there is shared power of
investment or shared rights of ownership.

         The following table sets forth as of June 3, 2004, the name and the
number of shares of our common stock, par value of $0.001 per share, held of
record or beneficially by each person who held of record, or was known by us to
own beneficially, more than 5% of the 31,958,846 outstanding shares of our
common stock, and the name and shareholdings of each director and of all
executive officers and directors as group.

Type of                                       Amount & Nature of          % of
Security Name and Address                    Beneficial Ownership         Class
-------------------------                    --------------------         -----

Common   Bakhytbek Baiseitov                     1,714,286(1)              5.4%
         20A Kazibek Bi Street
         Almaty 480100
         Republic of Kazakhstan

Common   Georges Benarroch                              -0-                 *
         41A Avenue Road,
         Toronto, Ontario M5R 2G3, Canada

Common   BMB Munai LLC                           7,657,143(1)             23.9%
         69A Kabanbai Batyr Street
         Almaty, Kazakhstan

Common   Boris Cherdabayev                       3,142,857(1)              9.8%
         20A Kazibek Bi Street
         Almaty 480100
         Republic of Kazakhstan

Common   Toleush Tolmakov                        3,500,000                11.0%
         Daulet village, oil storage depot
         Aktau 466200
         Republic of Kazakhstan

                                       39
<PAGE>

Common   Anuar Kulmagambetov                       285,714                  *
         20A Kazibek Bi Street
         Almaty 480100
         Republic of Kazakhstan

Common   Mirgali Kunayev                         1,143,571(1)              3.6%
         63 Dostyk Avenue, Second Floor
         Almaty 480100
         *Republic of Kazakhstan

Common   Troy Nilson                                    -0-                 *
         533 West 2600 South #250
         Bountiful, Utah 84010

Common   Stephen Smoot                                  -0-                 *
         875 Donner Way, Suite 705
         Salt Lake City, Utah 84108

Common   Valery Tolkachev                               -0-                 *
         27/6 Pokrovka St.
         Moscow, Russia

All officers and directors                      12,800,000                40.1%
as a group (8 persons)

--------------------------------------------------------------------------------
                  TOTAL                         17,729,285                54.6%

*  Less than 1%.

(1)      BMB Munai, LLC., is a Kazakhstan limited company, in which Mr.
         Baiseitov holds a 33.34% interest and Messers. Cherdabayev and Kunayev
         each hold 33.33% interests. Therefore, Messers. Baiseitov, Cherdabayev
         and Kunayev may be deemed to be the beneficial owners of our shares
         that are held by BMB Munai, LLC.

         Messers. Cherdabayev and Kulmagambetov are officers of the Company. Mr.
Tolmakov is an officer of the Company's wholly-owned subsidiary, Emir Oil, LLC.
Messers. Baiseitov, Benarroch, Cherdabayev, Nilson, Smoot and Tolkachev are
directors of the Company.

Change in Control

         To our knowledge, there are no present arrangements or pledges of our
securities that may result in a change in control of the Company.

Item 12. Certain Relationships and Related Transactions.

         The transactions described below were carried out on terms at least as
favorable to the Company as could have been obtained from unaffiliated third
parties in arm's length negotiations, however, because the transactions were
with parties that may be deemed to be affiliates, it is possible that we would
have obtained different terms from a truly unaffiliated third-party.

                                       40
<PAGE>

         On May 2, 2003, we obtained a short-term loan in the amount of
$2,000,000 from BMB Munai, LLC and Alexandre Agaian, who, at the time was an
officer and director of the Company, to finance the acquisition of a 70%
interest in Emir Oil. On November 26, 2003, this debt was converted to 571,429
shares of our common stock.

         On September 15, 2003, we obtained a short-term loan from Caspian
Services Group, Limited, a shareholder, and a related party through Mirgali
Kunayev who, at the time was a director of both Caspian Services Group and BMB.
The loan was in the amount of $500,000 and was for a period of six months,
bearing interest at 16.5% per annum. The loan was full repaid on November 26,
2003.

         During 2004 and 2005, we have retained the services of several
entities, including Caspian Services Group, TatArka, LLP, KazMorGeofizika CJSC,
and PE Kunayeva to provide us with geophysical research, drilling and other
services. Each of these entities may be deemed to be affiliated with BMB through
Mirgali Kunayev, who served as a BMB director from November 2003 through January
13, 2005, and continues to be a BMB shareholder. Mr. Kunayev was or is an
officer and/or director of Caspian Services, TatArka and KazMorGeofizica at the
time these services were rendered or contracted for. Mr. Kunayev's sister owns
PE Kunayeva. In connection these services, as of March 31, 2005, we have made,
or are committed to make the following payments:

                                                     For the period
                          For the year ended   from inception May 6, 2003
                            March 31, 2005       through March 31, 2004
                          ------------------   --------------------------
TatArka LLP                    $  403,613                $2,619,807
KazMorGeoFizika CJSC           $  181,536                $   33,180
PE Kunayeva                    $   51,271                $        -
                               ----------                ----------
   Total                       $  636,420                $2,652,987
                               ==========                ==========

         During 2004 and 2005 we have leased land, oil storage facilities and
office and warehouse space in Aktau, Kazakhstan from Term Oil Ltd. We expect to
continue to lease these facilities for full term of our agreement with Term Oil,
which expires on December 31, 2005. We are currently negotiating a long term
extension of this lease, which we expect to complete by no later than September
2005. During the fiscal year ended March 31, 2005 and 2004 we paid Term Oil
$218,428 and $12,817, respectively for the use of these facilities. Toleush
Tolmakov, a BMB shareholder and director of Emir Oil is the owner of Term Oil.

         During 2004 and 2005 both us and our subsidiary, Emir Oil, maintained
bank accounts with Bank CenterCredit. During the fiscal year ended March 31,
2005 and the period from inception through March 31, 2004 we paid Bank
CenterCredit $19,777 and $5,381 respectively for banking services provided.
Bakhytbek Baiseitov, a BMB shareholder and director is the Chairman of the Board
of Directors of Bank CenterCredit.

                                       41
<PAGE>

         During 2004 and 2005 Zhanaozen Repair and Mechanical Plant Ltd supplied
construction materials for our exploration and development activities. During
the fiscal year ended March 31, 2005 and the period from inception through March
31, 2004 we paid Zhanaozen Repair and Mechanical Plant Ltd $116,403 and $66,065
respectively for materials supplied. Adilbay Tolmakov, brother of Toleush
Tolmakov, a BMB shareholder and director of Emir Oil, is 38% shareholder of
Zhanaozen Repair and Mechanical Plant Ltd.

         For additional information regarding transactions with related parties
are disclosed in Note 18 to our Consolidated Financial Statements.

Item 13. Exhibits and Reports on Form 8-K.

         (a) Reports on Form 8-K.

         On January 18, 2005 we filed a Current Report on Form 8-K disclosing
the resignation of Mirgali Kunayev from our board of directors and the
appointment of Stephen Smoot to fill the vacancy created by Mr. Kunayev's
resignation. We also disclosed that we had received notification from the State
of Nevada that our change of domicile from the State of Delaware to the State of
Nevada had been completed and that in connection with the change in domicile we
had amended our Articles of Incorporation and By-Laws.

         On March 11, 2005 we filed a Current Report on Form 8-K disclosing that
we had engaged in a private placement of our common stock.

         (b) Exhibits. The following exhibits are included as part of this
report:

         Exhibit 21.1    Subsidiaries
         Exhibit 23.1    Consent of Chapman Petroleum Engineering Ltd.,
                         Independent Petroleum Engineers
         Exhibit 31.1    Certification of Principal Executive Officer Pursuant
                         to Section 302 of the Sarbanes-Oxley Act of 2002
         Exhibit 31.2    Certification of Principal Financial Officer Pursuant
                         to Section 302 of the Sarbanes-Oxley Act of 2002
         Exhibit 32.1    Certification of Principal Executive Officer Pursuant
                         to Section 906 of the Sarbanes-Oxley Act of 2002.
         Exhibit 32.2    Certification of Principal Financial Officer Pursuant
                         to Section 906 of the Sarbanes-Oxley Act of 2002.

Item 14. Principal Accountant Fees and Services

         BDO Kazakhstanaudit served as our independent registered public
accounting firm for the year ended March 31, 2005 and the period from inception
through the year ended March 31, 2004, and is expected to serve in that capacity

                                       42
<PAGE>

for the current year. Mintz & Partners LLP, Chartered Accountants served as our
independent registered public accounting firm for the year ended March 31, 2003.
Principal accounting fees for professional services rendered for us by BDO
Kazakhstanaudit for the year ended March 31, 2005 and 2004, is summarized as
follows:

                                                2005               2004
--------------------------------------------------------------------------------

           Audit                             $149,343            $126,314
           Audit related                            -                   -
           Tax                                      -                   -
           All other                                -                   -
         -----------------------------------------------------------------------

           Total                             $149,343            $126,314
         =======================================================================

         Principal accounting fees for professional services rendered for us by
Mintz & Partners LLP, Chartered Accountants for the period from inception
through March 31, 2004, is summarized as follows:

                                                             2004

           Audit                                           $3,691
           Audit related                                        -
           Tax                                                  -
           All other                                            -
         ------------------------------------------------------------
           Total                                           $3,691
         ============================================================

         Audit Fees. Audit fees were for professional services rendered in
connection with our annual financial statement audits and quarterly reviews of
financial statements for filing with the Securities and Exchange Commission.

         Audit Committee Pre-Approval Policies and Procedures. At its regularly
scheduled and special meetings, the Audit Committee considers and pre-approves
any audit and non-audit services to be performed by our independent accountants.
The Audit Committee has the authority to grant pre-approvals of non-audit
services.

                                       43
<PAGE>

                                   SIGNATURES

         In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf,
thereunto duly authorized.

                                                     BMB MUNAI, INC.



Date: July 13, 2005                    /s/ Boris Cherdabayev
                                    --------------------------------------------
                                    Boris Cherdabayev, Chief Executive
                                    Officer, President and Director


Date: July 13, 2005                   /s/ Anuar Kulmagambetov
                                    --------------------------------------------
                                    Anuar Kulmagambetov, Chief Financial Officer


Date: July 13, 2005                  /s/ Bakhytbek Baiseitov
                                    --------------------------------------------
                                    Bakhytbek Baiseitov, Director


Date: July 14, 2005                   /s/ Georges Benarroch
                                    --------------------------------------------
                                    Georges Benarroch, Director


Date: July 13, 2005                  /s/ Troy Nilson
                                    --------------------------------------------
                                    Troy Nilson, Director


Date: July 13, 2005                   /s/ Stephen Smoot
                                    --------------------------------------------
                                    Stephen Smoot, Director


Date: July 13, 2005                   /s/ Valery Tolkachev
                                    --------------------------------------------
                                    Valery Tolkachev, Director

                                       44
<PAGE>


                                 BMB MUNAI, INC
                          (A Development Stage Entity)


                        CONSOLIDATED FINANCIAL STATEMENTS
                        For the year ended March 31, 2005



<PAGE>





TABLE OF CONTENTS
--------------------------------------------------------------------------------

                                                                        Page


Report OF Independent REGISTERED PUBLIC ACCOUNTING FIRM                    F-1


CONSOLIDATED Financial Statements for the Year Ended March 31, 2005


    Consolidated Balance Sheet                                             F-2


    Consolidated Statements of Loss                                        F-3


    Consolidated Statements of Shareholders' Equity                        F-4


    Consolidated Statements of Cash Flow                                   F-5


    Notes to Consolidated Financial Statements                        F-6-F-25


<PAGE>


Report of Independent Registered Public Accounting Firm


The Board of Directors
BMB Munai, Inc.


We have audited the accompanying consolidated balance sheet of "BMB Munai" Inc.
(a company in the development stage) as of March 31, 2005, and the related
consolidated statements of loss, shareholders' equity, and cash flows for the
year ended March 31, 2005 and for the period from inception (May 6, 2003)
through March 31, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted an audit in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for purposes of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BMB Munai, Inc. at
March 31, 2005 and the consolidated results of its operations and its cash flow
for the period from inception (May 6, 2003) through March 31, 2005 in conformity
with accounting principles generally accepted in the United States of America.


BDO Kazakhstanaudit, LLP


June 13, 2005
Almaty, Kazakhstan

                                      F-1
<PAGE>
<TABLE>
<CAPTION>
BMB MUNAI, INC
(A Development Stage Entity)

CONSOLIDATED BALANCE SHEET
AS OF MARCH 31

------------------------------------------------------------------------------------------------------------
                                                                                Notes        2005
ASSETS

CURRENT ASSETS
<S>                                                                               <C>        <C>
    Cash and cash equivalents                                                     6          $  9,989,632
    Marketable securities                                                         7               788,921
    Trade accounts receivable                                                                     132,400
    Inventories                                                                   8             3,227,411
    Prepaid expenses, net                                                         9             4,172,291
                                                                                             ------------
       Total current assets                                                                    18,310,655
                                                                                             ------------

NON-CURRENT ASSETS
    Oil and gas properties, full cost method, net                                11            42,964,359
    Other fixed assets, net                                                      12               683,459
    Intangible assets, net                                                       13                14,435
    Restricted cash                                                              14                60,973
                                                                                             ------------
       Total non-current assets                                                                43,723,226
                                                                                             ------------

TOTAL ASSETS                                                                                 $ 62,033,881
                                                                                             ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                             18          $  5,844,639
    Due to reservoir consultants                                                 14               278,000
    Taxes payable                                                                                 333,063
    Due to Astana Fund                                                           10               250,000
    Accrued liabilities and other payables                                                        291,969
                                                                                             ------------
       Total current liabilities                                                                6,997,671
                                                                                             ------------

LONG TERM LIABILITIES
    Due to reservoir consultants                                                 14               222,000
    Liquidation fund                                                             14                60,973
    Deferred income tax liabilities                                               5                   343
                                                                                             ------------
       Total long term liabilities                                                                283,316
                                                                                             ------------

COMMITMENTS AND CONTINGENCIES                                                    19                     -

SHAREHOLDERS' EQUITY
    Share capital                                                                16                30,514
    Additional paid-in capital                                                   16            58,460,520
    Deficit accumulated during the development stage                                           (3,738,140)
                                                                                             ------------
       Total shareholders' equity                                                              54,752,894
                                                                                             ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                   $ 62,033,881
                                                                                             ============


See notes to the consolidated financial statements.

                                      F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BMB MUNAI, INC
(A Development Stage Entity)

CONSOLIDATED STATEMENTS OF LOSS

-----------------------------------------------------------------------------------------------------------------------------

                                                                                       Period from          Period from
                                                                                         inception            inception
                                                                   Year ended          (May 6, 2003)        (May 6, 2003)
                                                                   March 31,              through              through
                                                    Notes             2005             March 31, 2004       March 31, 2005
                                                                  ------------         --------------       --------------
<S>                                                   <C>         <C>                    <C>                 <C>
REVENUES                                              4           $    973,646           $        -          $    973,646

EXPENSES
    Production                                                         265,149                    -               265,149
    Selling                                                            206,929                    -               206,929
    General and administrative                                       4,060,962              781,757             4,842,719
    Amortization and depreciation                                       66,451                4,758                71,209
                                                                  ------------           ----------          ------------
Total expenses                                                       4,599,491              786,515             5,386,006
                                                                  ------------           ----------          ------------
LOSS FROM OPERATIONS                                                (3,625,845)            (786,515)           (4,412,360)

OTHER INCOME (EXPENSE)
    Realized gain on marketable securities                             185,067               19,368               204,435
    Unrealized gain (loss) on marketable
       securities                                                     (252,767)             248,407                (4,360)
    Foreign exchange gain, net                                         499,521               70,949               570,470
    Interest income, net                                                17,799              (84,007)              (66,208)
    Other income, net                                                   52,210                    -                52,210
                                                                  ------------           ----------          ------------
Total other income (expenses)                                          501,830              254,717               756,547
                                                                  ------------           ----------          ------------
LOSS BEFORE INCOME TAXES                                            (3,124,015)            (531,798)           (3,655,813)

INCOME TAX EXPENSE                                    5                   (343)                   -                  (343)
                                                                  ------------           ----------          ------------
LOSS BEFORE MINORITY INTEREST                                       (3,124,358)            (531,798)           (3,656,156)

MINORTIY INTEREST                                     15                     -               81,984                81,984
                                                                  ------------           ----------          ------------
NET LOSS                                                          $ (3,124,358)          $ (613,782)         $ (3,738,140)
                                                                  ============           ==========          ============

WEIGHT AVERAGE COMMON SHARES
   OUTSTANDING                                        17            26,948,437            7,398,240
LOSS PER COMMON SHARE (BASIC AND
   DILUTED)                                           17          $      0.116           $    0.083
                                                                  ============           ==========


See notes to the consolidated financial statements.

                                      F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BMB MUNAI, INC
(A Development Stage Entity)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

-----------------------------------------------------------------------------------------------------------------------------------

                                     Notes       Number of           Share       Additional        Deficit          Total
                                                   shares           capital       paid-in        accumulated
                                                                                  capital         during the
                                                                                                 development
                                                                                                   stage
                                                 ----------        --------    ------------     ------------     ------------
<S>                                              <C>               <C>         <C>              <C>              <C>
At May 6, 2003 (Inception date)                     491,655        $    492    $       (492)    $          -     $          -

    Stock dividends                                  50,000              50             (50)               -                -
    Common stock issued during
       the merger                                14,285,844          14,286         (14,286)               -                -
    Conversion of debt to common
       stock                                        571,428             571       1,999,429                -        2,000,000
    Common stock issued in
       private placement                          4,830,494           4,830       9,931,044                -        9,935,874
    Options exercised                               200,000             200         199,800                -          200,000
    Net loss for the period                               -               -               -         (613,782)        (613,782)
                                                 ----------        --------    ------------     ------------     ------------
At March 31, 2004                                20,429,421          20,429      12,115,445         (613,782)      11,522,092

    Common stock issued in
       exchange of 30% shares of
       Emir Oil LLC                   16          3,500,000           3,500      19,071,500                -       19,075,000
    Common stock issued in
       private placement              16          6,584,340           6,585      27,273,575                -       27,280,160
    Common stock issued for
       subscription                   16          1,101,000           1,101       5,503,899                -        5,505,000
    Subscription receivable           16         (1,101,000)         (1,101)     (5,503,899)               -       (5,505,000)
    Net loss for the year                                 -               -               -       (3,124,358)      (3,124,358)
                                                 ----------        --------    ------------     ------------     ------------
At March 31, 2005                                30,513,761        $ 30,514    $ 58,460,520     $ (3,738,140)    $ 54,752,894
                                                 ==========        ========    ============     ============     ============


See notes to the consolidated financial statements.

                                      F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BMB MUNAI, INC
(A Development Stage Entity)

CONSOLIDATED STATEMENTS OF CASH FLOW
-------------------------------------------------------------------------------------------------------------------------------

                                                                                           Period from        Period from
                                                                                             inception         inception
                                                                                           (May 6, 2003)     (May 6, 2003)
                                                                            Year ended         through           through
                                                             Notes        March 31, 2005   March 31, 2004    March 31, 2005
                                                                           -------------    -------------     -------------
<S>                                                                        <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                   $  (3,124,358)   $    (613,782)    $  (3,738,140)

Adjustments to reconcile net loss to net cash used in
   operating activities:
    Depreciation, depletion and amortisation                                     133,903            4,758           138,661
    Provision for doubtful accounts                                              129,051                -           129,051
    Minority interest                                         15                 (82,134)          82,134                 -
    Deferred income tax liabilities                            5                     343                -               343
    Unrealized gain on dealing securities                                        252,767         (248,407)            4,360
Changes in operating assets and liabilities
    Decrease / (increase) in dealing securities                                1,837,448       (2,630,729)         (793,281)
    Increase in accounts receivable                                             (132,400)               -          (132,400)
    Increase in inventories                                                   (3,043,527)        (183,884)       (3,227,411)
    Increase in prepaid expenses                                              (3,758,022)        (522,148)       (4,280,170)
    Increase in accounts payable and other accruals                            6,371,925          750,726         7,122,651
                                                                           -------------    -------------     -------------
Net cash used in operations                                                   (1,415,004)      (3,361,332)       (4,776,336)

Interest paid                                                                          -          (84,007)          (84,007)
                                                                           -------------    -------------     -------------
Net cash used in operating activities                                         (1,415,004)      (3,445,339)       (4,860,343)
                                                                           -------------    -------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Acquisition of oil and gas properties                                    (17,411,861)      (6,253,186)      (23,665,047)
    Acquisition of other fixed assets                                           (536,700)        (264,411)         (801,111)
    Acquisition of intangible assets                                             (12,345)          (5,411)          (17,756)
    Restricted cash                                                              (40,973)         (20,000)          (60,973)
    Deposits                                                                           -          (21,172)          (21,172)
                                                                           -------------    -------------     -------------
Net cash used in investing activities                                        (18,001,879)      (6,564,180)      (24,566,059)
                                                                           -------------    -------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from sale of common stock                        16              27,280,160        9,935,874        37,216,034
    Proceeds from short-term financing                                                 -          500,000           500,000
    Repayment of short-term financing                                                  -         (500,000)         (500,000)
    Proceeds from issuance of convertible debt                                         -        2,000,000         2,000,000
    Proceeds from exercise of common stock options                                     -          200,000           200,000
                                                                           -------------    -------------     -------------
Net cash provided by financing activities                                     27,280,160       12,135,874        39,416,034
                                                                           -------------    -------------     -------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                        7,863,277        2,126,355         9,989,632

CASH AND CASH EQUIVALENTS at beginning of year                                 2,126,355                -                 -
                                                                           -------------    -------------     -------------
CASH AND CASH EQUIVALENTS at end of year                       6           $   9,989,632    $   2,126,355     $   9,989,632
                                                                           =============    =============     =============

Non cash transactions:
    Conversion of debt into common stock                                   $           -    $   2,000,000
    Accrual of liabilities to Astana Fund                     10           $     250,000    $           -
    Acquisition of 30% of Emir Oil LLP by issuance of
       3,500,000 shares of common stock                       16           $  19,075,000    $           -

See notes to the consolidated financial statements.

                                      F-5
</TABLE>
<PAGE>

BMB MUNAI, INC
(A Development Stage Entity)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005

--------------------------------------------------------------------------------

1.    DESCRIPTION OF BUSINESS

      BMB Munai, Inc. (the "Company") was incorporated in Utah in July 1981. The
      Company later changed domicile to Delaware on February 7, 1994. Prior to
      November 26, 2003, the Company existed under the name InterUnion Financial
      Corporation ("InterUnion"). The Company changed domicile from Delaware to
      Nevada in December 2004.

      On November 26, 2003, InterUnion executed an Agreement and Plan of Merger
      (the "Agreement") with BMB Holding, Inc ("BMB"), a private Delaware
      corporation, formed for the purpose of acquiring and developing oil and
      gas fields in the Republic of Kazakhstan. As a result of the merger, the
      shareholders of BMB have obtained control of the Company. BMB was treated
      as the acquiror for accounting purposes. A new board of directors was
      elected that is comprised primarily of the former directors of BMB
      Holding, Inc.

      The Company's financial statements presented are a continuation of BMB,
      and not those of InterUnion Financial Corporation, and the capital
      structure of the Company is now different from that appearing in the
      historical financial statements of InterUnion Financial Corporation due to
      the effects of the recapitalization.

      The Company owns one hundred percent (100%) interest in Emir Oil LLP
      ("Emir Oil" or "Emir"). Emir Oil is a Limited Liability Partnership formed
      under the laws of the Republic of Kazakhstan for the sole purpose of
      acquiring the oil and gas exploration license AI No. 1552 (the "License")
      and Contract No. 482 for Exploration of Hydrocarbons in
      Aksaz-Dolinnoe-Emir oil fields, located in blocks XXXVI-10-C (Partially),
      F (Partially) XXXVI-11-A (Partially), D n (Partially) (the "Contract"), in
      the Republic of Kazakhstan.

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

      The Company has minimal operations to date and is considered to be in the
      development stage. The Company began test production at one well in May
      2004 and at two wells in December 2004. In the first quarter of 2005 the
      Company completed drilling of one well.


2.    SIGNIFICANT ACCOUNTING POLICIES

      Basis of consolidation

      The Company's financial statements present the consolidated results of BMB
      Munai, Inc., and Emir Oil LLP, its 100% owned subsidiary (hereinafter
      collectively referred to as the "Company"). All significant inter-company
      balances and transactions have been eliminated from the Consolidated
      Financial Statements.

      Emir Oil has a fiscal year ending December 31, which is different from
      Company's fiscal year end. All transactions of Emir Oil from the date of
      its purchase by BMB (June 7, 2003) through March 31, 2005 are reflected in
      the Consolidated Financial Statements and Notes to the Consolidated
      Financial Statements.

      These consolidated financial statements are prepared in accordance with
      United States Generally Accepted Accounting Principles ("US GAAP").

                                      F-6
<PAGE>

BMB MUNAI, INC
(A Development Stage Entity)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005

--------------------------------------------------------------------------------

      Emir Oil maintains its accounting records in Kazakhstan Tenge and prepares
      separate statutory financial statements in accordance with accounting
      legislation in the Republic of Kazakhstan. Statutory accounting principles
      and procedures in Kazakhstan differ from accounting principles generally
      accepted under US GAAP. Accordingly, the accompanying Consolidated
      Financial Statements, which include Emir Oil's statutory accounting
      records, reflect adjustments necessary for such financial statements to be
      presented in accordance with US GAAP.

      Use of estimates

      The preparation of financial statements in conformity with US GAAP
      requires management to make estimates and assumptions that affect certain
      reported amounts of assets and liabilities and the disclosures of
      contingent assets and liabilities at the date of the Consolidated
      Financial Statements and revenues and expenses during the reporting
      period. Accordingly, actual results could differ from those estimates and
      affect the results reported in these Consolidated Financial Statements.

      Licences and contracts

      Emir Oil is the operator of the Aksaz, Dolinnoe and Emir oil and gas
      fields in western Kazakhstan (the "ADE Block", the "ADE Fields"). The
      Government of the Republic of Kazakhstan (the "Government") initially
      issued the license to Zhanaozen Repair and Mechanical Plant on April 30,
      1999. On September 23, 2002, the license was assigned to Emir Oil. On June
      9, 2000, the contract for exploration of the Aksaz, Dolinnoe and Emir oil
      and gas fields was entered into between the Agency of the Republic of
      Kazakhstan on Investments and the Zhanaozen Repair and Mechanical Plant.
      On September 23, 2002, the contract was assigned to Emir Oil. On September
      10, 2004 the Government extended duration of the Contract for exploration
      and License for seven years to June 9, 2007. On December 7, 2004 the
      Government assigned to Emir Oil exclusive right to explore the additional
      territory during the remaining term of the License. The Company is legally
      entitled to receive this commercial production contract and has an
      exclusive right to negotiate this Contract and the Government is obligated
      to conduct these negotiations under the Law of Petroleum in Kazakhstan. If
      no terms can be negotiated, the Company has a right to produce and sell
      oil, including export oil, under the Law of Petroleum for the term of its
      existing contract through June 9, 2007.

      Foreign currency translation

      Transactions denominated in foreign currencies are reported at the rates
      of exchange prevailing at the date of the transaction. Monetary assets and
      liabilities denominated in foreign currencies are translated to U.S.
      dollar at the rates of exchange prevailing at the balance sheet dates. Any
      gains or losses arising from a change in exchange rates subsequent to the
      date of the transaction are included as an exchange gain or loss in the
      Consolidated Statements of Income.

      Share-Based Compensation

      The Company accounts for options granted to non-employees at their fair
      value in accordance with FAS 123, Accounting for Stock-Based Compensation.
      Under FAS No. 123, stock-based compensation is determined as the fair
      value of the equity instruments issued. The measurement date for these
      issuances is the earlier of the date at which a commitment for performance
      by the recipient to earn the equity instruments is reached or the date at
      which the recipient's performance is complete. Stock options were granted
      to the "selling agents" in the private equity placement transactions and
      have been offset to the proceeds as a cost of capital.

                                      F-7
<PAGE>

      The Company has a stock option plan as described in Note 16. Compensation
      expense for options granted to employees is determined based on their fair
      values at the time of grant, the cost of which is recognized in the
      Consolidated Statement of Income over the vesting periods of the
      respective options.

      Risks and uncertainties

      The ability of the Company to realize the carrying value of its assets is
      dependent on being able to develop, transport and market oil and gas.
      Currently exports from the Republic of Kazakhstan are primarily dependent
      on transport routes either via rail, barge or pipeline, through Russian
      territory. Domestic markets in the Republic of Kazakhstan might not permit
      world market price to be obtained. However, management believes that over
      the life of the project, transportation options will be improved by
      further increases in the capacity of the transportation options.

      Recognition of revenue and cost

      Revenue and associated costs from the sale of oil are charged to the
      period when goods were shipped or when ownership title transferred.
      Produced but unsold products are recorded as inventory until sold. As of
      March 31, 2005 the production unit of the Company - Emir Oil had test
      production sales at Kazakhstan domestic market price which is considerably
      lower than world market prices.

      Income taxes

      The Company accounts for income taxes using the liability method. Under
      the liability method, deferred tax assets and liabilities are recognized
      for the future tax consequences attributable to differences between
      financial statement carrying amounts of existing assets and liabilities
      and their respective tax bases. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable income in
      the years in which those temporary differences are expected to be
      recovered or settled. Under the liability method, the effect on previously
      recorded deferred tax assets and liabilities resulting from a change in
      tax rates is recognized in earnings in the period in which the change is
      enacted.

      Cash and cash equivalents

      The Company considers all demand deposits and money market accounts
      purchased with an original maturity of three months or less to be cash and
      cash equivalents. The fair value of cash and cash equivalents approximates
      their carrying amounts due to their short-term maturity.

      Marketable securities

      Marketable securities consist of short term repurchase agreements for
      securities issued by Kazakhstan banks and Kazakhstan financial
      institutions. The Company records these marketable securities as trading
      securities and any change in the fair market value is recorded in
      earnings.

      Trade accounts receivable and prepaid expenses

      Accounts receivable and prepaid expenses are stated at their net
      realizable values after deducting provisions for uncollectable amounts.
      Such provisions reflect either specific cases or estimates based on
      evidence of collectability. The fair value of accounts receivable and
      prepaid expense accounts approximates their carrying amounts due to their
      short-term maturity.

                                      F-8
<PAGE>

      Inventories

      Inventories of equipment for development activities, tangible drilling
      materials required for drilling operations, spare parts, diesel fuel, and
      various materials for use in oil field operations are recorded at the
      lower of cost and net realizable value. Under the full cost method
      inventory is transferred to oil and gas properties when used in
      exploration, drilling and development operations in oilfields.

      Inventories of crude oil are recorded at the lower of cost and net
      realizable value. Cost comprises direct materials and, where applicable,
      direct labour costs and those overheads, which have been incurred in
      bringing the inventories to their present location and condition. Cost is
      calculated using the weighted average method. Net realizable value
      represents the estimated selling price less all estimated costs to
      completion and costs to be incurred in marketing, selling and
      distribution.

      Oil and gas properties

      The Company follows the full cost method of accounting for its costs of
      acquisition, exploration and development of oil and gas properties.

      Under full cost accounting rules, the net capitalized costs of evaluated
      oil and gas properties shall not exceed an amount equal to the present
      value of future net cash flows from estimated production of proved oil and
      gas reserves, based on current economic and operating conditions,
      including the use of oil and gas prices as of the end of each quarter.

      Given the volatility of oil and gas prices, it is reasonably possible that
      the estimate of discounted future net cash flows from proved oil and gas
      reserves could change. If oil and gas prices decline, even if only for a
      short period of time, it is possible that impairments of oil and gas
      properties could occur. In addition, it is reasonably possible that
      impairments could occur if costs are incurred in excess of any increases
      in the cost ceiling, revisions to proved oil and gas reserves occur, or if
      properties are sold for proceeds less than the discounted present value of
      the related proved oil and gas reserves.

      All geological and geophysical studies, with respect to the ADE Block have
      been capitalized as part of the oil and gas properties.

      The Company's oil and gas properties primarily include the value of the
      license and other capitalized costs under this method of accounting.

      Costs of acquiring unproved leases shall be evaluated for impairment until
      such time as the leases are proved or abandoned. In addition, if the sums
      of expected undiscounted cash flows are less than net book value,
      unamortized costs at the field level will be reduced to a fair value.

      Depreciation, depletion and amortization of producing properties is
      computed using the unit-of-production method based on estimated proved
      recoverable reserves.

      Other fixed assets

      Other fixed assets are valued at the historical cost adjusted for
      impairment loss less accumulated depreciation. Historical cost includes
      all direct costs associated with the acquisition of the fixed assets.

                                      F-9
<PAGE>

      Depreciation of other fixed assets is calculated using the straight line
      method based upon the following estimated useful lives:

         Constructions                                    7-10 years
         Machinery and equipment                          6-10 years
         Vehicles                                          3-5 years
         Office equipment                                  3-5 years
         Other                                             2-7 years

      Maintenance and repairs is charged to expenses as incurred. Renewals and
      betterments are capitalized.

      Other fixed assets of the Company are evaluated for impairment. If the
      sums of expected undiscounted cash flows are less than net book value,
      unamortized costs of other fixed assets will be reduced to a fair value.

      Intangible assets

      Intangible assets include accounting and other software. Amortization of
      intangible assets is calculated using straight line method upon estimated
      useful life ranging from 3 to 4 years.

      Restricted cash

      Restricted cash includes funds deposited in a Kazakhstan bank and is
      restricted to meet possible environmental obligations according to the
      regulations of the Republic of Kazakhstan. The fair value of these funds
      approximates their carrying amounts as amount and conditions of deposited
      funds governed by the Government of the Republic of Kazakhstan (see Note
      14).

      Comparative figures

      The presentation of certain amounts for previous year has been
      reclassified to conform to the presentation adopted for the current year.

      Recent accounting pronouncements

      In June 2004, the FASB issued an exposure draft of a proposed statement,
      "Fair Value Measurements" to provide guidance on how to measure the fair
      value of financial and non-financial assets and liabilities when required
      by other authoritative accounting pronouncements. The proposed statement
      attempts to address concerns about the ability to develop reliable
      estimates of fair value and inconsistencies in fair value guidance
      provided by current US GAAP, by creating a framework that clarifies the
      fair value objective and its application in GAAP. In addition, the
      proposal expands disclosures required about the use of fair value to
      re-measure assets and liabilities. The standard would be effective for
      financial statements issued for fiscal years beginning after June 15,
      2005. The Company is reviewing The Exposure Draft to determine the
      potential impact, if any, on its Consolidated Financial Statements.

      In November 2004, the EITF ratified Issue No. 03-13, "Applying the
      Conditions in Paragraph 42 of FASB Statement No.144, Accounting for the
      Impairment or Disposal of Long-Lived Assets, in Determining Whether to
      Report Discontinued Operations." The EITF reached a consensus that
      classification of a disposed of or held-for-sale component as a
      discontinued operation is only appropriate if the ongoing entity (i)

                                      F-10
<PAGE>

      expects to have no continuing "direct" cash flows, and (ii) does not
      retain or expect to retain an interest, contract or other arrangement
      sufficient to enable it to exert significant influence over the disposed
      component's operating and financial policies after the disposal
      transaction. Application of this consensus did not have a material impact
      on the Company's Consolidated Financial Statements.

      In December 2004, the FASB issued Statement 153, "Exchanges of
      Non-monetary Assets", an amendment of APB Opinion 29, "Accounting for
      Non-monetary Transactions." This amendment eliminates the exception for
      non-monetary exchanges of similar productive assets and replaces it with a
      general exception for exchanges of non-monetary assets that do not have
      commercial substance. Under Statement 153, if a non-monetary exchange of
      similar productive assets meets a commercial-substance criterion and fair
      value is determinable, the transaction must be accounted for at fair value
      resulting in recognition of any gain or loss. This statement is effective
      for non-monetary transactions in fiscal periods that begin after June 15,
      2005 and will not impact the Company's financial position or results of
      operations, and cash flows.

      In December 2004, the FASB issued a revision of SFAS No. 123 "Share-Based
      Payment" (No. 123R). The statement establishes standards for the
      accounting for transactions in which an entity exchanges its equity
      investments for goods and services. It also addresses transactions in
      which an entity incurs liabilities in exchange for goods or services that
      are based on the fair value of the entity's equity instruments or that may
      be settled by the issuance of those equity instruments. The statement does
      not change the accounting guidance for share-based payments with parties
      other than employees. The statement requires a public entity to measure
      the cost of employee service received in exchange for an award of equity
      instruments based on the grant-date fair value of the award (with limited
      exception). That cost will be recognized over the period during which an
      employee is required to provide service in exchange for the award (usually
      the vesting period). A public entity will initially measure the cost of
      employee services received in exchange for an award of a liability
      instrument based on its current fair value; the fair value of that award
      will be remeasured subsequently at each reporting date through the
      settlement date. Changes in fair value during the requisite service period
      will be recognized as compensation over that period. The grant-date for
      fair value of employee share options and similar instruments will be
      estimated using option-pricing models adjusted for the unique
      characteristics of these instruments. The Company will be required to
      comply with this pronouncement for periods beginning after December 15,
      2005.

3.    ACQUISITION

      On June 7, 2003, BMB acquired a 70% equity interest in Emir Oil for
      $1,300,000. On May 24, 2004, the Company agreed to purchase the remaining
      30% interest of its minority interest partner in Emir Oil in exchange for
      3,500,000 shares of restricted Company common stock. On August 6, 2004,
      the Company issued the 3,500,000 shares to its minority partner in Emir
      Oil (see Note 16). The aggregate purchase price was determined to be
      $19,075,000 using a price of the Company's common shares on OTCBB on
      August 6, 2004 of $5.45 per share. The entire purchase price has been
      allocated to oil and gas properties in the accompanying Consolidated
      Balance Sheet.

      The results of Emir's operations have been included in the Consolidated
      Financial Statements since June 7, 2003. Emir had no operations prior to
      its acquisition by BMB. Emir holds an oil and gas contract for the ADE
      Block. Based on its ownership of Emir Oil, the Company is required to fund
      the exploration and development efforts of Emir Oil (see Note 19).

                                      F-11
<PAGE>

4.    REVENUES

      Revenues represent sales of oil and gas during the test of exploration
      wells within the domestic market of the Republic of Kazakhstan. Price for
      oil and gas in a domestic market of the Republic of Kazakhstan is
      substantially lower than world market prices.

5.    INCOME TAXES

      The income tax charge in the income statement comprised:
<TABLE>
<CAPTION>
                                                                                      2005
       <S>                                                                                 <C>
       Current tax expense                                                                 $   -
       Deferred tax expense                                                                  343
                                                                               -------------------
                                                                                           $ 343
                                                                               ===================

      Relationship between tax expenses and accounting loss for the years ended
March 31 are explained as follows:
<CAPTION>
                                                                                      2005                   2004
       <S>                                                                        <C>                      <C>
       Loss before income taxes and minority interest                             $ (3,124,015)            $ (531,798)
                                                                               -------------------    -------------------
       Expected tax provision                                                         (504,227)              (129,027)
       Add tax effect of:
          Permanent differences                                                        495,397                (70,973)
          Change in valuation allowance                                                  9,173                200,000
                                                                               -------------------    -------------------
                                                                                  $        343             $        -
                                                                               ===================    ===================

      Deferred taxes reflect the estimated tax effect of temporary differences
      between assets and liabilities for financial reporting purposes and those
      measured by tax laws and regulations. The components of deferred tax
      assets and deferred tax liabilities are as follows:
<CAPTION>
                                                                                      2005                   2004
       <S>                                                                             <C>                    <C>
       Deferred tax assets
          Loss carryforward                                                            $ 209,173              $ 200,000
                                                                               -------------------    -------------------

       Deferred tax liabilities:
          Unrealised interest income                                                         343                      -

       Valuation allowance                                                              (209,173)              (200,000)

                                                                               -------------------    -------------------
       Net deferred tax liability                                                      $     343              $       -
                                                                               ===================    ===================
</TABLE>

                                      F-12
<PAGE>

6.    CASH AND CASH EQUIVALENTS

      As of March 31 cash and cash equivalents included:
<TABLE>
<CAPTION>
                                                                                       2005
       <S>                                                                            <C>
       Cash at bank, US Dollars                                                       $ 9,982,103
       Cash at bank, foreign currency                                                       7,529
                                                                                -------------------
                                                                                      $ 9,989,632
                                                                                ===================

      As of March 31, 2005 the Company pledged cash in amount of $15,567 to
      collateralize payment to oil drilling and service company for drilling
      services.


7.    MARKETABLE SECURITIES

      Marketable securities as of March 31 were as follows:
<CAPTION>
                                                                                       2005
       <S>                                                                              <C>
       Bonds                                                                            $ 418,952
       Shares                                                                             369,969
                                                                                -------------------
                                                                                        $ 788,921
                                                                                ===================

      As of March 31, 2005 the Company pledged all marketable securities to
      collateralize payment to oil drilling and service company for drilling
      services.

8.    INVENTORIES

      Inventories as of March 31 were as follows:
<CAPTION>
                                                                                      2005
       <S>                                                                           <C>
       Construction material                                                         $ 3,103,555
       Purchased semi products                                                            59,706
       Crude oil produced                                                                  7,735
       Other                                                                              56,415
                                                                               --------------------
                                                                                     $ 3,227,411
                                                                               ====================
</TABLE>

                                      F-13
<PAGE>

9.    PREPAID EXPENSES, NET

      Prepaid expenses as of March 31 were as follows:
<TABLE>
<CAPTION>
                                                                                      2005
       <S>                                                                           <C>
       Advances for material                                                         $ 2,301,074
       VAT recoverable                                                                 1,217,751
       Advances for services                                                             589,944
       Other                                                                             192,573
      Reserves against uncollectible advances and prepayments                           (129,051)
                                                                               --------------------
                                                                                     $ 4,172,291
                                                                               ====================


10.   DUE TO ASTANA FUND

      In 2004 the Government of the Republic of Kazakhstan imposed a liability
      in the amount of $250,000 to make cash contributions to the Astana Fund.
      The Astana Fund is a government fund used by the Government of the
      Republic of Kazakhstan to accumulate cash for construction and development
      of Astana, Kazakhstan, the new capital of the Republic of Kazakhstan.

11.   OIL AND GAS PROPERTIES, NET

      Oil and gas properties as of March 31 were as follows:
<CAPTION>
                                                                                      2005
       <S>                                                                          <C>
       Subsoil use right                                                            $ 20,788,119
       Cost of drilling wells                                                          9,334,021
       Professional services received in exploration and development activities        4,798,314
       Material and fuel used in exploration and development activities                2,891,765
       Infrastructure development costs                                                1,231,391
       Geological and geophysical                                                        653,571
       Other capitalized costs                                                         3,334,630
       Accumulated depreciation, depletion and amortization                              (67,452)
                                                                               --------------------
                                                                                    $ 42,964,359
                                                                               ====================
</TABLE>

                                      F-14
<PAGE>

12.   OTHER FIXED ASSETS, NET
<TABLE>
<CAPTION>
                                     Constructions    Machinery       Vehicles        Office          Other          Total
                                                    and equipment                    equipment
                                     -------------  -------------     ---------      ---------       --------      ---------
      <S>                               <C>           <C>             <C>            <C>             <C>           <C>
      Cost
      at April 1, 2004                  $ 62,583      $ 114,650       $  46,450      $  33,286       $  7,442      $ 264,411
       Additions                          23,622        119,550         266,757         95,697         31,074        536,700
       Disposals                               -              -               -              -            (95)           (95)
                                        --------      ---------       ---------      ---------       --------      ---------
      at March 31, 2005                   86,205        234,200         313,207        128,983         38,421        801,016
                                        --------      ---------       ---------      ---------       --------      ---------

      Accumulated depreciation
      at April 1, 2004                         -          1,261           2,289          1,039            169          4,758
       Charge for the period              10,789         17,025          56,577         22,795          5,708        112,894
       Disposals                               -              -               -              -            (95)           (95)
                                        --------      ---------       ---------      ---------       --------      ---------
      at March 31, 2005                   10,789         18,286          58,866         23,834          5,782        117,557
                                        --------      ---------       ---------      ---------       --------      ---------

      Net book value at March
        31, 2004                          62,583        113,389          44,161         32,247          7,273        259,653
                                        ========      =========       =========      =========       ========      =========

      Net book value at March
        31, 2005                        $ 75,416      $ 215,914       $ 254,341      $ 105,149       $ 32,639      $ 683,459
                                        ========      =========       =========      =========       ========      =========
</TABLE>

      In accordance with FAS No. 19, Financial Accounting and Reporting by Oil
      and Gas Producing Companies, depreciation related to support equipment and
      facilities used in exploration and development activities in amount of $
      49,764 was capitalized to oil and gas properties.


13.   INTANGIBLE ASSETS, NET

                                                               2005
      Cost
      Beginning balance                                           $  5,411
       Additions                                                    12,345
                                                         -----------------
      Ending balance                                                17,756

      Accumulated depreciation
      Beginning balance                                                  -
      Amortization for the period                                    3,321
                                                         -----------------
      Ending balance                                                 3,321

                                                         -----------------
      Net book value                                              $ 14,435
                                                         =================


14.   LONG TERM LIABILITIES

      a) Due to reservoir consultants

      The amount of $222,000 due to reservoir consultants represents a part of
      $700,000 contract with PGS Reservoir Consultants payable during 2006. The
      Company paid to PGS Reservoir Consultants $200,000 during 2004 and will
      pay $278,000 in 2005.

                                      F-15
<PAGE>

      b) Liquidation fund

      Under the laws of the Republic of Kazakhstan, the Company is obligated to
      set aside funds for required environmental remediation. As of March 31,
      2005 the Company contributed $60,973 to the Liquidation Fund.


15.   MINORITY INTEREST

      Minority interest represents interest of 30% shareholder of Emir Oil. On
      May 24, 2004, the Company agreed to purchase the remaining 30% interest of
      its minority interest partner in Emir Oil in exchange for 3,500,000 shares
      of restricted Company common stock. On August 6, 2004, the Company issued
      the 3,500,000 shares to its minority partner in Emir Oil (see Notes 3 and
      16).
<TABLE>
<CAPTION>
                                                                                  2005
      <S>                                                                            <C>
      Beginning balance                                                              $ 82,134
       Share of minority for net loss                                                       -
       Share capital portion of minority                                                    -
       Recovery of minority interest after purchase of remaining interest             (82,134)

                                                                            -----------------
      Ending balance                                                                 $      -
                                                                            =================


16.   SHARE AND ADDITIONAL PAID IN CAPITALS

      Common and preferred stock as of March 31 are as following:
<CAPTION>

                                                                                    2005                  2004
      <S>                                                                        <C>                  <C>
      Preferred stock, $0.001 par value
       Authorised                                                                 20,000,000           20,000,000
       Issued and outstanding                                                              -                    -

      Common stock, $0.001 par value
       Authorised                                                                100,000,000          100,000,000
       Issued and outstanding                                                     30,513,761           20,429,421
</TABLE>

      Reverse merger

      During the year ended March 31, 2004, the Company completed a reverse
      merger with BMB Holding, Inc. Additionally the Company:

      a) Completed a private placement for the total amount of $11,113,562. b)
      Converted a $2,000,000 debt to the shareholders of BMB Holding, Inc. into
      equity. c) Issued 200,000 shares of stock upon exercise of stock option
      worth $200,000. d) Completed a 10 for 1 reverse stock split.

      Acquisition

      On May 24, 2004, the Company agreed to purchase the remaining 30% interest
      of its minority interest partner in Emir Oil in exchange for 3,500,000
      shares of restricted Company common stock. On August 6, 2004, the Company
      issued the 3,500,000 shares to its minority partner in Emir Oil (see Note
      3). The aggregate purchase price was determined to be $19,075,000 using a

                                      F-16
<PAGE>

      price of the Company's common shares on OTCBB on August 6, 2004 of $5.45
      per share. The entire purchase price has been allocated to oil and gas
      properties in the accompanying Consolidated Balance Sheet.

      Private placements

      On July 2, 2004, the Company sold an aggregate of 4,584,340 common shares
      of the Company at $4.00 per share in a private placement offering. The
      Company received $17,311,906 net of the agent fees and out of pocket
      expenses.

      On March 9, 2005, the Company sold an aggregate of 2,000,000 common shares
      of the Company at $5.00 per share in a private placement offering. The
      Company received $9,968,254 net of the agent fees and out of pocket
      expenses.

      On March 31, 2005, the Company issued for subscription an aggregate of
      1,101,000 common shares of the Company at $5.00 per share in a private
      placement offering.

      Common stocks sold at private placements as of March 31 are as following:
<TABLE>
<CAPTION>

                                                    Number of   Share price         Gross amount       Net amount
                                                  shares sold                           raised           received
      <S>                                          <C>         <C>                   <C>               <C>
      2004
       First private placement                     4,830,494   $ 2.15-$ 2.50         $ 11,113,562      $  9,935,874
                                           -----------------                    ----------------- ------------------
                                                   4,830,494                           11,113,562         9,935,874

      2005
       Second private placement                    4,584,340          $ 4.00           18,337,360        17,311,906
       Third private placement (first
          closing)                                 2,000,000          $ 5.00           10,000,000         9,968,254
       Third private placement (second
          closing)                                 1,101,000          $ 5.00                    -                 -
                                           -----------------                    ----------------- ------------------
                                                   7,685,340                           28,337,360        27,280,160

                                                  12,515,834                         $ 39,450,922      $ 37,216,034
                                           =================                    ================= ==================
</TABLE>

      The offerings were made only to accredited investors in the United States
      under Regulation D and pursuant to Regulation S to non U.S. Persons.

      Share-Based Compensation

      On November 19, 2003, the Company granted options to the placement agent
      for services rendered in connection with a private placement of the
      Company's common stock in November 2003. The first option granted the
      placement agent the right to purchase up to 200,000 common shares of the
      Company at an exercise price of $1.00 per share. The placement agent
      exercised this option and purchased 200,000 shares for $200,000 on
      December 15, 2003. The second option grants the placement agent the right
      to purchase up to 142,857 common shares of the Company at an exercise
      price of $3.50 per share. This option expires on November 26, 2008.

      In December 2003, the Company granted warrants to a placement agent in
      connection with funds raised on the Company's behalf. These warrants grant
      the placement agent the right to purchase up to 275,050 shares of the
      Company's common stock at an exercise price of $2.15 and 208,000 shares of
      the Company's common stock at an exercise price of $2.50 per share. The
      warrants expire at the end of June 2005.

                                      F-17
<PAGE>

      On July 2004, the Company granted warrants to a placement agent in
      connection with funds raised on the Company's behalf. These warrants grant
      the placement agents the right to purchase up to 458,434 shares of the
      Company's common stock at an exercise price of $4.00 per share. The
      warrants expire at the first quarter of 2006 calendar year.

      During the year ended March 31, 2005 the Board of Directors (the "Board")
      of the Company approved an incentive stock option plan (the "plan") under
      which directors, officers and key personnel may be granted options to
      purchase common shares of the Company. The Company has reserved 5,000,000
      common shares for issuance upon the exercise of options granted under the
      terms of the plan. The Board determines the exercise price of each option,
      provided that no option shall be granted with an exercise price at a
      discount to market. The vesting periods established under the plan and the
      term of the options are set by the Board. During the third quarter of the
      year ended March 31, 2005 the Company granted stock options to its
      corporate secretary for the past services rendered. These options grant
      the employee the right to purchase up to 60,000 shares of the Company's
      common stock at an exercise price of $4.00 per share. The options expire
      in five years from the date of grant. Granted options vest immediately.
      Compensation expense for options granted to a corporate secretary is
      determined based on their fair values at the time of grant, the cost of
      which in the amount of $81,000 is recognized in the Consolidated Statement
      of Income and Consolidated Balance Sheet.

      Stock options and warrants outstanding and exercisable as of March 31 are:
<TABLE>
<CAPTION>
                                                                                                      Weighted
                                                                                 Number of        Average Exercise
                                                                                   shares               price
                                                                            -----------------    -----------------
      <S>                                                                           <C>                  <C>
       As of March 31, 2003                                                                 -           $     -

          granted                                                                     825,907              2.19
          exercised                                                                  (200,000)             1.00
                                                                            -----------------    -----------------
       As of March 31, 2004                                                           625,907              2.57

          granted                                                                     518,434              4.00
                                                                            -----------------    -----------------
       As of March 31, 2005                                                         1,144,341            $ 3.22
                                                                            =================    =================

      Stock options and warrants as of March 31, 2005 are:
<CAPTION>


                         Options and Warrants outstanding                         Options and Warrants exercisable
      ------------------------------------------------------------------------  ----------------------------------
          Range of          Options and         Weighted         Weighted       Options and     Weighted Average
       exercise price         Warrants          Average          Average          Warrants       Exercise Price
                                             Exercise Price     Contractual
                                                               Life (years)
      ------------------  -----------------  --------------- -----------------  --------------- ------------------
       <S>                    <C>                <C>               <C>             <C>               <C>
       $ 2.15 - $ 4.00        1,144,341          $ 3.22            2.20            1,144,341         $ 3.22
</TABLE>

                                      F-18
<PAGE>

      The estimated fair value of the stock options and warrants issued were
      determined using Black-Scholes option pricing model with the following
      assumptions:
<TABLE>
<CAPTION>
                                                                                     2005                2004
       <S>                                                                        <C>                 <C>
       Risk-free interest rate                                                       3.20%               2.00%
       Expected option life                                                         1 year               3 years
       Expected volatility in the price of the Company's common shares                76%                 246%
       Expected dividends                                                              0%                   0%

       Weighted average fair value of options and warrants granted
          during the year                                                           $ 2.22               $ 3.81

17.   EARNINGS PER SHARE (BASIC AND DILUTED)

      The calculation of the basic and diluted earnings per share is based on
      the following data:
<CAPTION>
                                                                                     2005                 2004
       <S>                                                                        <C>                 <C>
      Numerator
      Net loss for basic and diluted loss per share                                  3,124,358              613,782

      Denominator
      Weighted average number of common shares for the purposes of
         basic and diluted earnings per share                                       26,948,437            7,398,240
                                                                             ----------------     ----------------

      Loss per share (basic and diluted)                                              $ 0.116              $ 0.083
                                                                             ================     ================

      The effect of the stock warrants and stock options is anti-dilutive.

18.   RELATED PARTY TRANSACTIONS
<CAPTION>
                                                                                      2005                 2004
      <S>                                                                           <C>                 <C>
       Accounts payable                                                             $ 503,045           $  103,231
       Prepaid expenses                                                               150,841                    -

       Services rendered                                                              610,336            2,724,433
       Operating lease of land, premises and warehouses                               218,428               12,817

       Loans received and repaid                                                            -            2,500,000
       Guarantees received                                                            600,000                    -
</TABLE>

      On September 15, 2003 BMB Holding, Inc. obtained a short-term financing
      for covering expenses related to the reverse merger and private placement
      from one of its shareholders, Caspian Services Group, Ltd. The loan in the
      amount of $500,000 was for a term of six months with the annual interest
      rate of 16.5%. This loan was repaid in full on November 26, 2003 from the
      proceeds of the private placement.

      On May 25, 2004 the Company received a letter of guarantee for drilling of
      exploratory wells from KazMorGeofizika CJSC. The letter of guarantee in
      the amount of $1,000,000 for the period of drilling works was issued to
      the supplier of drilling works and closed on February 15, 2005. On
      February 15, 2005 the Company received a letter of guarantee in the amount
      of $600,000 from KazMorGeofizika CJSC for drilling of another exploratory
      well.

                                      F-19
<PAGE>

19.   COMMITMENTS AND CONTINGENCIES

      Historical investments by the Government of the Republic of Kazakhstan

      The Government of the Republic of Kazakhstan made historical investments
      in the ADE Block in total amount of $ 5,994,200. When the Company applies
      for and is granted commercial production rights for the ADE Block, the
      Company will be required to begin repaying these historical investments to
      the Government of the Republic of Kazakhstan. The terms of repayment will
      be negotiated at the time the Company applies for commercial production
      rights.

      Capital Commitments

      Under the terms of its exploration contract, Emir Oil is required to spend
      a total of $32 million in exploration and development activities on the
      ADE Block. To retain its rights under the contract, the Company must spend
      a minimum of $9.3 million in 2005, $6 million in 2006 and $4.5 million in
      2007. The failure to make these minimum capital expenditures could result
      in the loss of the contract.

      Operating Environment

      The Company's principal business unit, Emir Oil, operates within the
      Republic of Kazakhstan. Laws and regulations affecting businesses
      operating in the Republic of Kazakhstan are subject to rapid changes and
      the Company's assets and operations could be at risk in the event of
      negative changes in the political and business environment.

      Government taxes and legislation in the Republic of Kazakhstan

      The local and national tax environment in the Republic of Kazakhstan is
      subject to change and inconsistent application, interpretation and
      enforcement. Non-compliance with Kazakhstan laws and regulations can lead
      to imposition of penalties and interest.

      Environmental matters

      The Company believes it is currently in compliance with all existing
      Kazakhstan environmental laws and regulations. However, Kazakhstan
      environmental laws and regulations may change in the future.

      Pension and retirement plans

      Employees of the Company receive pension benefits in accordance with the
      laws and regulations of the respective countries. As of March 31, 2005 and
      2004 the Company was not liable for any supplementary pensions,
      post-retirement, health care, insurance benefits or retirement indemnities
      to its current or former employees.

      Other matters

      In December 2003, a lawsuit was filed in Florida naming the Company as one
      of the defendants. The claim of breach of contract, unjust enrichment,
      breach of fiduciary duty, conversion and violation of a Florida trade
      secret statute in connection with a business plan for the development
      Aksaz, Dolinnoe and Emir oil and gas fields owned by Emir Oil. The
      plaintiffs seek unspecified compensatory and exemplary damages.

                                      F-20
<PAGE>

      In April 2005, Sokol Holdings, Inc., filed a complaint in United States
      District Court, Southern District of New York alleging that the Company
      wrongfully induced Mr. Tolmakov, Director of Emir Oil, to breach a
      contract under which Mr. Tolmakov had agreed to sell to Sokol 70% of his
      90% interest in Emir Oil LLP. Sokol Holdings, Inc. seeks damages in an
      unspecified amount exceeding $75,000 to be determined at trial, punitive
      damages, specific performance in the form of an order compelling BMB to
      relinquish its interest in Emir and the underlying interest in the ADE
      fields to Sokol Holdings, Inc. and such other relief as the court finds
      just and reasonable.

      The Company is confident that the matters shall be resolved in the
      Company's favor. The Company has retained legal counsels to protect its
      interests. In the opinion of the Company's management and legal counsels,
      the resolution of those lawsuits will not have a material adverse effect
      on Company's financial condition, results of operations or cash flows.

20.   FINANCIAL INSTRUMENTS

      The nature of the Company's operations exposes the Company to fluctuations
      in commodity prices, foreign currency exchange rates, credit risk and
      country risk. The Company recognizes these risks and manages operations in
      a manner such that exposure to these risks minimized to the extent
      practical.

      As of March 31, 2005 marketable securities of $788,921 are held in short
      term repurchase agreements for securities issued by Kazakhstan banks and
      Kazakhstan financial institutions. As of March 31, 2005 cash and cash
      equivalents include deposits in Kazakhstan banks in the amount $9,090,276.
      As of March 31, 2005 the Company made advance payments to Kazakhstan
      companies and budget in the amount $4,301,342. As of March 31, 2005 trade
      accounts receivable of $132,400 are with the Kazakhstan oil processing
      plant. Restricted cash reflected in the long-term assets consists of
      $60,973 deposited in a Kazakhstan bank and restricted to meet possible
      environmental obligations according to the regulations of Kazakhstan.
      Furthermore, the primary asset of the Company is Emir Oil; an entity
      formed under the laws of the Republic Kazakhstan.

 21.  SUBSEQUENT EVENTS

      On March 31, 2005, the Company issued for subscription an aggregate of
      1,101,000 common shares of the Company at $5.00 per share in a private
      placement offering. Pursuant to the offering closing on April 12, 2005 the
      Company raised total proceeds of $5,505,000 (see Note 16).

      On April 12, 2005, the Company granted warrants to placement agents in
      connection with funds raised on the Company's behalf. These warrants grant
      the placement agents the right to purchase up to 110,100 shares of the
      Company's common stock at an exercise price of $5.00 per share. The
      warrants expire on April 11, 2006.

      In May and June 2005 a party exercised stock warrants for 275,050 shares
      at the exercise price of $2.15 and stock warrants for 109,030 shares at
      the exercise price of $2.50.

      On May 27, 2005 the Company made a cash contribution of $250,000 to Astana
      Fund as a part of the social program of investing activity of the Company
      (see Note 10).

                                      F-21
<PAGE>

BMB MUNAI, INC
(A Development Stage Entity)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005

--------------------------------------------------------------------------------

22.   SUPPLEMENTARY FINANCIAL INFORMATION ON OIL AND NATURAL GAS EXPLORATION
      DEVELOPMENT AND PRODUCTION ACTIVITIES (unaudited)

      This footnote provides unaudited information required by SFAS No. 69,
      "Disclosures about Oil and Natural Gas Producing Activities." The
      Company's oil and natural gas properties are located in the Republic of
      Kazakhstan, which constitutes one cost center.

      Capitalized Costs - Capitalized costs and accumulated depletion,
      depreciation and amortization relating to our oil and natural gas
      producing activities, all of which are conducted in the Republic of
      Kazakhstan, are summarized below:
<TABLE>
<CAPTION>
                                                                                          For the period from
                                                            For the year ended          inception (May 6, 2003)
                                                              March 31, 2005               to March 31, 2004
                                                        ---------------------------    ---------------------------
      <S>                                                    <C>                             <C>
      Developed oil and natural gas properties               $ 43,031,811                    $ 6,495,186
      Unevaluated oil and natural gas properties                        -                              -
      Accumulated depletion, depreciation and
         amortization                                             (67,452)                             -
                                                        ---------------------------    ---------------------------
      Net capitalized cost                                   $ 42,964,359                    $ 6,495,186
                                                        ===========================    ===========================

      Costs Incurred - Costs incurred in oil and natural gas property
      acquisition, exploration and development activities are summarized below:
<CAPTION>
                                                                                          For the period from
                                                            For the year ended          inception (May 6, 2003)
                                                              March 31, 2005               to March 31, 2004
                                                        ---------------------------    ---------------------------
      <S>                                                             <C>                             <C>
      Acquisition costs:
          Unproved properties                                         $          -                    $         -
          Proved properties                                             20,788,119                      1,713,119
      Exploration costs                                                  3,373,092                      2,659,872
      Development costs                                                 18,870,600                      2,122,195
                                                        ---------------------------    ---------------------------
         Subtotal                                                       43,031,811                      6,495,186
      Asset retirement costs                                                     -                              -
                                                        ---------------------------    ---------------------------
          Total costs incurred                                        $ 43,031,811                    $ 6,495,186
                                                        ===========================    ===========================

      Results of Operations - Results of operations for the Company's oil and
      natural gas producing activities are summarized below:
<CAPTION>
                                                                                          For the period from
                                                            For the year ended          inception (May 6, 2003)
                                                              March 31, 2005               to March 31, 2004
                                                        ---------------------------    ---------------------------
      <S>                                                                <C>                                  <C>
      Oil and natural gas revenues                                       $ 973,646                            $ -

      Operating expenses:
         Oil and natural gas operating expenses
            and ad valorem taxes                                           197,697                              -
         Production taxes                                                        -                              -
         Accretion expense                                                       -                              -
         Depletion expense                                                  67,452                              -
                                                        ---------------------------    ---------------------------
         Results of operations from oil and gas
            producing activities                                         $ 708,497                            $ -
                                                        ===========================    ===========================
</TABLE>

                                      F-22
<PAGE>

      Reserves - Proved reserves are estimated quantities of oil and natural
      gas, which geological and engineering data demonstrate with reasonable
      certainty to be, recoverable in future years from known reservoirs under
      existing economic and operating conditions. Proved developed reserves are
      proved reserves that can reasonably be expected to be recovered through
      existing wells with existing equipment and operating methods. Proved oil
      and natural gas reserve quantities and the related discounted future net
      cash flows before income taxes (see Standardized Measure) for the periods
      presented are based on estimates prepared by Chapman Petroleum Engineering
      Ltd., independent petroleum engineers. Such estimates have been prepared
      in accordance with guidelines established by the SEC.

      The Company's net ownership in estimated quantities of proved oil and
      natural gas reserves, and changes in net proved reserves, all of which are
      located in the Republic of Kazakhstan, are summarized below:
<TABLE>
<CAPTION>
                                                                               Natural Gas
                                                                                  (Mcf)
                                                         ---------------------------------------------------------
                                                                                          For the period from
                                                            For the year ended        inception (May 6, 2003) to
                                                              March 31, 2005              March 31, 2004 (1)
                                                         -------------------------    ----------------------------
      <S>                                                             <C>                          <C>
      Proved developed and undeveloped
         reserves
            Beginning of the year                                               -                               -
            Revisions of previous estimates                                     -                               -
            Purchase of oil and gas properties                                  -                               -
            Extensions and discoveries                                 41,734,000                               -
            Sales of natural gas properties                                     -                               -
            Production                                                          -                               -
                                                         -------------------------    ----------------------------
            End of year                                                41,734,000                               -
                                                         =========================    ============================

      Proved developed reserves at year end                            15,917,000                               -
                                                         =========================    ============================
</TABLE>

(1)  The Company acquired the ADE Block during the period from inception through
     March 31, 2004. During that period, however, the Company had insufficient
     geological and engineering data to demonstrate proved reserves with
     reasonable certainty during that period.

                                      F-23
<PAGE>
<TABLE>
<CAPTION>
                                                                 Oil, Condensate and Natural Gas Liquids
                                                                                 (MBbls)
                                                         ---------------------------------------------------------
                                                                                          For the period from
                                                            For the year ended        inception (May 6, 2003) to
                                                              March 31, 2005              March 31, 2004 (1)
                                                         -------------------------    ----------------------------
      <S>                                                              <C>                            <C>
      Proved developed and undeveloped
         reserves
            Beginning of the year                                               -                               -
            Revisions of previous estimates                                     -                               -
            Purchase of oil and gas properties                                  -                               -
            Extensions and discoveries                                 34,026,302                               -
            Sales of natural gas properties                                     -                               -
            Production                                                     68,755                               -
                                                         -------------------------    ----------------------------
            End of year                                                33,957,547                               -
                                                         =========================    ============================

      Proved developed reserves at year end                            13,614,000                               -
                                                         =========================    ============================
</TABLE>

(1)   The Company acquired the ADE Block during the period from inception
      through March 31, 2004. During that period, however, the Company had
      insufficient geological and engineering data to demonstrate proved
      reserves with reasonable certainty during that period.

                                      F-24
<PAGE>

      Standardized Measure - The Standardized Measure of Discounted Future Net
      Cash Flows relating to the Company's ownership interests in proved oil and
      natural gas reserves for the period from inception (May 6, 2003) through
      March 31, 2004 and for the fiscal year ended March 31, 2005 are shown
      below:
<TABLE>
<CAPTION>
                                                                                         For the Period from
                                                         For the Year Ended March       Inception (May 6, 2003)
                                                                 31, 2005                  to March 31, 2004
                                                        ---------------------------    ---------------------------
      <S>                                                            <C>                                      <C>
      Future cash inflows                                            $ 726,849,000                            $ -
      Future oil and natural gas operating
         expenses                                                      238,912,000                              -
      Future development costs                                          41,050,000                              -
      Future income tax expense                                        281,326,000                              -
                                                        ---------------------------    ---------------------------
      Future net cash flows                                            165,561,000                              -
      10% discount factor                                               50,476,000                              -
                                                        ---------------------------    ---------------------------
      Standardized measure of discounted future
         net cash flows                                              $ 115,085,000                            $ -
                                                        ===========================    ===========================
</TABLE>

      Our standardized measure of discounted future net cash flows relating to
      proved oil and natural gas reserves were prepared in accordance with the
      provisions of SFAS 69. Future cash inflows are computed by applying year
      end prices of oil and natural gas to year end quantities of proved oil and
      natural gas reserves. Future oil and natural gas production and
      development costs are computed by estimating the expenditures to be
      incurred in producing and developing the proved oil and natural gas
      reserves at year end, based on year end costs and assuming continuation of
      existing economic condition.

      Future income tax expenses are calculated by applying appropriate year end
      tax rates to future pre-tax net cash flows relating to proved oil and
      natural gas reserves, less the tax basis of properties involved. Future
      income tax expenses give effect to permanent differences, tax credits and

                                      F-25
<PAGE>

      loss carryforwards relating to the proved oil and natural gas reserves.
      Future net cash flows are discounted at a rate of 10% annually to derive
      the standardized measure of discounted future net cash flows. The
      Standardized Measure of Discounted Future Net Cash Flows is not intended
      to represent the replacement cost or fair market value of the Company's
      oil and natural gas properties.

      Changes in Standardized Measure - Changes in Standardized Measure of
      Discounted Future Net Cash Flows relating to proved oil and gas reserves
      are summarized below:
<TABLE>
<CAPTION>
                                                                                          For the Period from
                                                        For the Year Ended March        Inception (May 6, 2003)
                                                                31, 2005                   to March 31, 2004
                                                       ----------------------------    ---------------------------
      <S>                                                            <C>                                      <C>
      Changes due to current year operations:
         Sales of oil and natural gas, net of oil
            and natural gas operating expenses                                   -                              -
         Sales of oil and natural gas properties                                 -                              -
         Purchase of oil and gas properties                                      -                              -
         Extensions and discoveries                                  $ 487,937,000                              -
      Changes due to revisions of standardized                                   -                              -
         variables
         Prices and operating expenses                                           -                              -
         Revisions to previous quantity estimates                                -                              -
         Estimated future development costs                             41,050,000                              -
         Income taxes                                                  281,326,000                              -
         Accretion of discount                                          50,476,000                              -
         Production rates (timing) and other                                     -                              -
                                                       ----------------------------    ---------------------------
      Net Change                                                       115,085,000                              -
      Beginning of year                                                          -                              -
                                                       ----------------------------    ---------------------------
      End of year                                                    $ 115,085,000                            $ -
                                                       ============================    ===========================
</TABLE>

      Sales of oil and natural gas, net of oil and natural gas operating
      expenses are based on historical pre-tax results. Sales of oil and natural
      gas properties, extensions and discoveries, purchases of minerals in place
      and the changes due to revisions in standardized variables are reported on
      a pre-tax discounted basis, while the accretion of discount is presented
      on an after tax basis.

                                      F-26