REGIONAL FINANCIAL CENTRE OF ALMATY: PERSPICTIVES FOR THE FUTURE

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REGIONAL FINANCIAL CENTRE OF ALMATY PERSPICTIVES
FOR THE FUTURE
Banking on Kazakhstan 2007
Alina Aldambergen Deputy Chairman Agency of the
Republic of Kazakhstan on regulation of
activities of the regional financial centre of
Almaty

• London
• January 31, 2007

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Kazakhstan
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Macroeconomic Indicators
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Kazakhstan Securities Market

• Key characteristics
• Leading and fast growing banking sector
• Well-build market infrastructure
• Large Institutional Investors with consistently
  growing assets
• Developed debt market
• Growing currency derivatives off-exchange market
• Lack of investments tools and actively trading
  parties

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Securities Market Capitalisation
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Regional Financial Centre of Almaty

• Regional Financial Centre of Almaty city (RFCA)
  is a special legal regime regulating relationship
  between the participants of the financial centre
  and interested parties and directed at the
  development of the financial market of Kazakhstan
• Goals of RFCA
• To develop the securities market
• To integrate Kazakhstan financial market into
  international capital markets
• To attract investments to the economy of the
  Republic of Kazakhstan
• To facilitate Kazakh capital expansion to
  international financial markets

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Requirements for RFCA Participants

• State registration certificate, given by the
  Agency
• License of Financial Supervision Agency
• Conducting trading with financial instruments on
  RFCA special trading floor only
• Having permanent office in Almaty city
• Minimum size of authorized capital stock for
• LLP USD 805
• JSC USD 402 501

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Tax Benefits

• The following types of financial services are
  relieved from corporative income tax
• Services for transactions with financial
  instruments at the expense and in the best
  interests of the client (as a broker)
• Nominal holding services
• Underwriting services
• Informational, analytical and consultative
  services
• Services for permanent announcement and support
  of prices on securities
• The following are not subject to legal entities
  and individuals income tax
• Dividends, interest for debt securities purchased
  on the RFCA special trading floor
• Capital gain for securities admitted to the RFCA
  special trading floor in case of transactions on
  this trading floor

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RFCA Special Trading Floor

• RFCA special trading floor is based on Kazakhstan
  Stock Exchange
• Trades are conducted in compliance with
  Regulation of organisation and functioning of
  Special Trading Floor

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Listing Rules

• There are two sectors at the special trading
  floor of RFCA
• Official list
• Unlisted securities of RFCA
• For listing one of the following requirements
  should be fulfilled
• Securities are listed on one of the stock
  exchanges recognised by the Agency
• Securities have credit ratings equal or above the
  level recognised by the Agency
• The issuer complies with listing requirements
  defined by RFCA special trading floor and the
  Agency
• Disclosure requirements

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Possibilities for issuers

• Main investors in Kazakhstan are
• Pension Funds
• Banks
• Insurance companies
• Mutual investment funds

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Pension Funds

• There are 14 accumulative pension funds in
  Kazakhstan as of January 1, 2007

Source Agency of the Republic of Kazakhstan on
the regulation and supervision of financial
market and financial organisations
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Pension Funds

• Pension Funds assets can be invested in
• Corporate securities of foreign issuers, which
  correspond to following requirements
• debt securities with minimum international rating
  of ???- (Standard Poors and Fitch) or same
  level of rating (Moodys Investors Service)
• stocks of issuers with minimum international
  rating of ???- (Standard Poors and Fitch) or
  same level of rating (Moodys Investors Service)
• Securities of International Financial
  Organisations
• Shares of investment funds with international
  rating Standard Poors principal stability
  fund ratings not lower than ??Bm- or Standard
  Poors fund credit quality ratings higher than
  ?BBf-
• Not rated debt securities listed on RFCA special
  trading floor (not more than 5 of pension fund
  assets)

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Kazakh Banks

• There are 34 banks in Kazakhstan as of January 1,
  2007

Source Agency of the Republic of Kazakhstan on
the regulation and supervision of financial
market and financial organisations
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Kazakh Banks

• Banks can invest their assets in following
  financial instruments
• shares or stakes in authorized capital of
  non-residents banks, insurance companies,
  pension funds, securities market participants,
  SPV's
• bonds with rating higher than A- (Standard
  Poors and Fitch) or A3 (Moodys Investors
  Service)
• bonds listed on KASE (A or B)
• bonds of International Financial Organisations

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Insurance Companies

• There are 39 insurance companies in Kazakhstan as
  of December 1, 2007
• Total assets exceed USD 1 billion
• Insurance companies assets can be invested in
• shares or stakes in authorized capital of
  non-residents banks, insurance companies, pension
  funds, securities market participants
• corporate securities of foreign issuers
  non-residents with long-term rating in foreign
  currency not lower than BBB (Standard Poors
  and Fitch) or Baa2 (Moodys Investors Service)
• securities of International Financial
  Organisations

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Investment Funds

• Quantity of investment funds 76 (including 59
  closed, 9 open, 8 interval)
• Total assets USD 378.7 million
• Assets of investment funds can be invested in
  following financial instruments of non-residents
• bills, debt securities of non-residents with
  long-term rating in foreign currency not lower
  than BB- (Standard Poors and Fitch) or Ba3
  (Moodys Investors Service)
• financial instruments of investment funds with
  rating not lower than BB- (Standard Poors
  and Fitch) or Ba3 (Moodys Investors Service)
• derivatives of non-residents with long-term
  rating in foreign currency not lower than BB
  (Standard Poors and Fitch) or Ba1 (Moodys
  Investors Service)
• securities of International Financial
  Organisations

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Incentives for Issuers

• The Agency will reimburse audit expenses to
  issuers, financial instruments of which were
  admitted for trading on RFCA special trading
  floor
• This incentive is applicable to issuers, which
  before inclusion of their securities in the
  official list of the special trading floor have
  not carried out audit of financial statements in
  accordance with requirements set for issuers,
  financial instruments of which are to be
  admitted, included or have been already included
  in the official list.
• Reimbursement of audit costs takes place only
  once for each issuer

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Settlement Mode

• Capital flows in RFCA are subject to foreign
  currency legislation of the Republic of
  Kazakhstan
• Notification regime on currency operations
  between residents and non-residents as a result
  of rights and obligations concerning a base asset
  of derivatives has been canceled
• Currency transactions registration regime has
  been canceled for
• purchasing securities of residents by
  non-residents, including shares of investment
  funds-residents
• non-residents participate in authorized capital
  of residents
• residents make IPO on international capital
  markets including issuance of GDR
• Settlement can be carried out in Kazakhstan
  Tenge, US Dollars, Russian Rubles and other
  foreign currency

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Special Financial Court

• Civil-law disputes between participants of the
  financial centre will be settled in accordance
  with legislation of the Republic of Kazakhstan by
  the special financial court, powers of which are
  equivalent to the regional courts

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Contacts

• Alina Aldambergen, Deputy Chairman
• phone [phone]
• e-mail aldambergen_at_rfca.kz
• Gulnara Alimgazieva, Director, Department of
  Development
• phone [phone]
• e-mail alimgazieva_at_rfca.kz
• Aslan Kaligazin, Department of Development
• phone [phone]
• e-mail kaligazin_at_rfca.kz